Published: Mon, October 16, 2017
Culture | By Stewart Greene

IndusInd Bank drops after merger with Bharat Financial Inclusion

IndusInd Bank drops after merger with Bharat Financial Inclusion

During the day, it gained 4.29 per cent to Rs 1,046.50.

The merger will be effected through an all-stock transaction of BFIL into IndusInd through a composite scheme of arrangement.

The stock rose as much as 3.8 per cent to its highest since November 1, 2010.

Ending months of speculation, IndusInd Bank and the second largest microlender Bharat Financial Inclusion (BFIL) on Saturday announced largest merger in the MFI space in an all-share deal, which will help the private sector lender push its rural network and bring down credit cost for small borrowers.

This implies a premium of 12.6 per cent to Bharat Financial Inclusion Limited over two-week volume weighted price (VWAP).

The scheme contemplates merger of BFIL with IndusInd and simultaneous transfer of BFIL's business correspondent operations into a wholly owned subsidiary of IndusInd, which shall be incorporated after receipt o requisite regulatory approvals (BC-WOS).

Under the deal, IndusInd will exchange 639 of its shares for every 1,000 shares in Bharat Financial, the bank said in a stock exchange filing after a board meeting.

Post-merger IndusInd will have 3600+ banking points (excluding ATMs).

"The Board of the Bank believes that the composite scheme of arrangement relating to the merger of these two illustrious institutions will add value to all stakeholders and the Bank", said R. Seshasayee, Chairman, IndusInd Bank.

There will be a preferential allotment of warrants to the promoters of IndusInd in accordance with the applicable RBI and Sebi guidelines as an anti-dilutive measure. Bharat Financial had already been acting as a business correspondent for the bank.

P H Ravikumar, chairman, Bharat Financial Inclusion, said: "The transaction will bring huge benefits to Bharat Financial Inclusion's vast customer base, staff and shareholders".

The IndusInd scrip closed 0.43 per cent up at Rs 1,750.15 on the BSE on Friday, while BFIL shares closed 0.38 per cent up at Rs 1,003.45.

Motilal Oswal also reiterated its buy rating with a target of Rs 2,000, saying while the merger is clearly a sweet deal for Bharat Financial shareholders, the bank is set to benefit as merger will be accretive on margins, return on assets, return on equity, earnings per share and book value.

"It is a matter of vast pleasure that Bharat Financial Inclusion Limited has taken today its first steps to be a part of a larger banking family".

Speaking at a press conference in Mumbai, IndusInd CEO, Romesh Sobti said the bank will have 1400-1500 branches after the merger.

Bharat Financial had unsuccessfully applied for a universal banking licence in the past.

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