Bharat Financial Inclusion Limited (BFIL), formerly SKS Microfinance, on 11 September 2017 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. 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.
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”. “The company has entered into an exclusivity agreement with IndusInd Bank for discussion about the proposed potential strategic combination by way of amalgamation through a scheme of arrangement or any other suitable structure,” BFIL informed the stock exchanges earlier in the day. BFIL will be able to migrate its operations involving a little over 6 million rural borrowers to IndusInd Bank’s banking platform, thereby bringing down its business costs.