Bharat Financial, IndusInd Bank sign exclusive merger talk deal

Bharat Financial Inclusion Limited (BFIL), formerly SKS Microfinance, on Monday said it had signed an exclusivity agreement for a potential merger with IndusInd Bank.

Statements issued by BFIL and IndusInd Bank confirmed months of speculation over negotiations between the two parties. Another potential acquirer, RBL Bank, is now out of contention.

BFIL Chief Executive Officer and Managing Director M R Rao said the merger would result in lower cost of funds and would help the company offer its customers savings products.

On its existing and new initiatives, such as home improvement loan products, Rao said the company would continue to explore these after the merger.

For IndusInd Bank, the immediate benefit will be deeper penetration in rural areas. BFIL has more than 1,400 branches, around 7 million customers and a loan book of close to Rs 11,000 crore. BFIL already works as a business correspondent for IndusInd Bank.

Both parties refused to provide details of whether IndusInd would make an open offer for BFIL shares or it would be an all-stock deal. These issues and whether BFIL will be merged into IndusInd Bank or remain a wholly owned subsidiary are part of the discussions.

According to a July 31 Morgan Stanley report, the valuation of BFIL was still “well below peak levels of the last three-four years, unlike most Indian financials”.