Private lender IndusInd Bank has entered into an exclusivity agreement with Bharat Financial Inclusion Ltd (BFIL) to evaluate merger between the two companies. “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 Inclusion said in a regulatory filing. “The exclusivity agreement provides for a mutually agreed exclusivity period for due diligence and discussions to evaluate a potential strategic combination between the company and BFIL,” IndusInd Bank said. Both the companies, however, did not elaborate on the duration of the exclusivity period.
In March this year, IndusInd Bank said it is in talks with multiple entities for business expansion, including the widely speculated merger of Bharat Financial Inclusion. In the statement issued to bourses following media reports that IndusInd and BFIL (formerly SKS Microfinance) are likely to announce a merger in an all-stock deal, the bank said the management has been authorised to evaluate strategic opportunities for business expansion. There have been a slew of deals between private sector lenders and MFIs as the former eye to expand their network in the hinterland which will help them meet the priority sector lending mandates and offer cross-sell opportunities.
BFIL already has a business correspondent relationship with IndusInd in Karnataka for many years now. The then SKS had a tumultuous time four years ago as it first faced a repayment crisis in its largest market of Andhra Pradesh and a corporate battle over leadership which ended with the exit of founder Vikram Akula. If the merger fructifies, it will be the third deal for IndusInd Bank, after Deutsche Banks credit card portfolio in 2011 and RBS diamond financing book in 2015. Other banks, including IDFC Bank, Kotak and RBL, have either acquired or taken minority stakes in MFIs in past 18 months. Shares of IndusInd Bank were trading 0.71 per cent higher at Rs 1,704.45 on BSE. Shares of Bharat Financial Inclusion were trading 1.60 per cent higher at Rs 950.95 on BSE.