IndusInd Bank, MFI Bharat Financial in merger talks

IndusInd Bank, which has been looking to expand its microfinance business, has begun ‘exclusive’ talks for a merger with micro lender Bharat Financial Inclusion (formerly SKS Microfinance), the companies informed the exchanges on Monday.

“The exclusivity agreement provides for a mutually agreed exclusivity period for due diligence and discussions,” the bank said in a filing, without specifying the period. The contours of the deal would be finalised during this exclusive negotiation period.

Bharat Financial has a presence in 18 States covering one lakh villages. IndusInd Bank has 1,210 branches and 2,090 ATMs.

The merger gives the micro lender an opportunity to cut costs, M.R. Rao, managing director and CEO, Bharat Financial, said. “We become a full-fledged financial inclusion company. Small borrowers can keep deposits also,” Mr. Rao said.

“For IndusInd Bank, this potential merger would be synergistic, boost earnings (RoA’s would cross the 2% mark) and prove to be a long term positive, as it will have access to BhaFin’s granular retail loan book, increasing cross selling opportunities and scale benefits,” Edelweiss wrote in a note.

IndusInd shares rose 5.6% to ₹1,790.65 on the BSE.