IndusInd Bank to acquire Bharat Financial, Merger deal will complete in 15 months

IndusInd Bank and Bharat Financial Inclusion LTD (BIFL)

IndusInd Bank Bharat Financial Inclusion Ltd (BIFL) Merge

After several months of speculation, IndusInd Bank and India Financial Inclusion Limited (BFIL), the country’s second largest micro finance company, have announced merger. All shares will be acquired for this biggest merger of the micro finance industry. IndusInd Bank will be able to access the villages by acquiring BFIL and using its network will reduce the cost of providing small loans. With this merger, the bank will get 68 lakh subscribers. At present, the number of its subscribers is about 10 million.This merger took place at a time when private banks like Kotak Mahindra and IDFC Bank have made several city-centric announcements.

With these announcements, the cost of giving loan to small borrowers of these banks will be reduced as they will be able to use cheap deposits. IndusInd Bank’s Managing Director and Chief Executive Ramesh Sobti said that the biggest benefit for us is the rural network. This will reduce our fund cost by about three-four percent.

Earlier, the board of directors of the bank and BFIL approved the proposals for merger and share swapping ratio. Under the proposal, shareholders of PFI will get 639 shares of IndusInd on 1000 shares. BFIL will get the entire capital, asset and liability indusind. However, the entire team of the BIFL will work independently in the form of subsidiary of IndusInd Bank and Business Correspondent. After the merger, the IndusInd Bank’s total staff will be 40 thousand.Sobti explained that 15,000 employees of BFIL will continue to work on the prerequisite service conditions. There will be no change in the Board of IndusInd Bank of Hinduja Group Bank.

IndusInd Bank Strategy: After this merger IndusInd Bank will be able to easily reach its villages. Out of the total 1210 branches of the bank, there are only 250 branches in the villages. On the other hand, BFIL’s network spread to one lakh villages all over the country. After the merger, it will be able to serve customers as an entire bank rather than just a micro finance company.

Problems of BIFL: PF RB Kumar, Non Executive Chairman, BFIL said that merging in the micro finance industry is not easy. The merger has been announced at a time when the MFI Act has passed in Andhra Pradesh. It will be very difficult to maintain survival for the MFI sector. BFIL had to be forced to merge due to regulatory stricter.This company was started by Microfinance’s famous celebrity Vikram Akula as SKS Microfinance. In 2010, the company came with the first IPO of Micro Finance Sector.

Shares in the stock: IndusInd Bank’s share in BSE closed 0.43 percent higher at 1750.15 on Friday, while BFIL’s share gained 0.38 percent to 1003.45.

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