Bharat Financial signs pact with IndusInd Bank to start merger talks

One of India’s oldest micro-lenders Bharat Financial Inclusion Ltd and Hinduja Group-backed private sector lender IndusInd Bank Ltd on Monday announced they will start talks for a merger, something that could help the former bring down credit costs and the latter offer a bouquet of retail loans.

The two companies have signed an exclusivity agreement to hammer out a deal before the end of this financial year.

The deal, if finalised, will allow IndusInd Bank to expand its retail loan book and fulfill Bharat Financial’s ambition to offer banking services.

“Bharat Financial has entered into an exclusivity agreement with IndusInd Bank for agreeing to have an exclusive discussion with IndusInd Bank about the proposed potential strategic combination by way of amalgamation through a scheme of arrangement, or any other suitable structure,” Bharat Financial said in a notice to the stock exchanges.

The transaction will help IndusInd grow its micro lending business. “We have been in the micro lending space for the past 5-6 years and already have a (micro) loan book of ₹3,000 crore. Merger with Bharat Financial will help us expand in this space as it has a large network and proven track record,” Romesh Sobti, MD and CEO at IndusInd Bank said over the phone. As of 30 June, 2017, Bharat Financial had a loan book of ₹10,971 crore.

The companies did not comment on the deal valuation as the transaction closure depends on approval from the central bank, shareholders and the boards of the two companies. Sobti, however, said it will be an all-stock deal and will factor in all the risks associated with a microfinance institution (MFI) loan portfolio.