IndusInd Bank, Bharat Financial in merger talks
Private sector lenders IndusInd Bank and Bharat Financial Inclusion formerly known as SKS Microfinance have entered into an exclusive agreement for exploring the possibility of a merger between both the entities.
IndusInd Bank is the sixth largest private sector bank in India by assets and the deal will help in expanding its consumer base in an industry characterised by stiff competition and subdued credit growth.
Bharat Financial is the first listed micro lender in India with 6.8 million customers and 1,408 branches employing 15,284 people.
“The company 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 without elaborating further on the proposed transaction.
The company further informed that the proposed transaction would be subject to due diligence, approval of the boards, shareholders and other statutory bodies.
While there are no indications about the timelines and pricing or deal structure, report suggests that the deal will likely be an all share swap deal. Market experts said that IndusInd bank is likely to reap significant benefit as it was already trying to get into the retail space very aggressively.
“For IndusInd Bank, this potential merger would be synergistic, boost earnings and prove to be a long term positive, as it will have access to Bharat Financial’s granular retail loan book, increasing cross selling opportunities and scale benefits. For Bharat Financial the pact entails elimination of political risks and pave way for better leverage, no cap on lending rates and funding cost benefits,” said Nilesh Parikh and Kunal Shah, analysts at Edelweiss Financial Services.
While the shares of Bharat Financial soared 3.34 per cent on BSE post announcement, the shares of IndusInd bank surged 5.56 per cent on Monday.
Earlier, there was strong speculation about a deal being worked out by both the banks following which Bharat Financial clarified that it has been exploring various strategic opportunities from time to time.
BHARAT FINANCIAL is the first listed micro lender in India with 6.8 million customers
INDUSIND BANK is the sixth largest private sector bank in India by assets For IndusInd Bank, this potential merger would be synergistic, boost earnings and prove to be a long term positive, as it will have access to Bharat Financial’s granular retail loan book, increasing cross selling opportunities and scale benefits
— NILESH PARIKH Analyst at Edelweiss Financial Services