BharatFin IndusInd Bank Merger

Formerly known as SKS Microfinance Ltd., and now named BHARAT FINANCIAL INCLUSION LTD., (BFIL), announced that it had entered into an agreement for a potential merger with IndusInd Bank Ltd.,  BFIL is already workings as a business correspondent for IndusInd Bank.

• Both the parties confirmed the news which is being speculated since several months, since RBL was another party which was trying to acquire the BFIL.
• The merger is expected to reduce the cost of funds and help the company in offering Savings Product to its customers.
• The proposal to explore the possibilities of new products like Homw Improvement loan products, the company would continue to discover into these areas after the merger.
• With the merger, IndusInd Bank is expected to penetrate in to the rural areas, since BFIL has more than 1400 branches with more than 7 million customers.  It has a loan book of around Rs. 11,000 crore.
• Still the discussions are on to decide as to whether BFIL will merged with IndusInd Bank or will become a wholly owned subsidiary of IndusInd Bank Ltd.,
• The valuation of BFIL as on 31^st July 2017 is said to be far below the peak levels of the previous three to four years, as compared to that of the other Indian financial companies.
• The agreement made now was to discuss the terms of proposed merger, valuation of assets which would pave way for a final deal.

The merger is expected to bring business stability amongst the Microfinance companies which had brought a regualr increase in risk and uncertainty in its continuance.

Around 87 per cent of the BFIL shares are held with foreign portfolio investors and 98 per cent are held by the public.   Speculations are still on the swap ratio of the shares held by the two companies.

It may be recalled that Vikram Akula in1997 had founded SKS Microfinance which became India’s first microfinance company to go to public in 2010.  However, the company was in red when its big base in Andhra Pradesh had a shake, due to a series of suicides by poor borrowers, which prompted to the State Government to advice people not to repay the loans.