The Board of Directors of IndusInd Bank Ltd and Bharat Financial Inclusion Ltd on Saturday approved the merger of two companies through a composite scheme of arrangement.
As per the merger terms, the shareholders of microfinance company Bharat Financial will receive 639 shares of IndusInd for every 1,000 shares of Bharat Financial, formerly known as SKS Microfinance Ltd.
This implies a premium of 12.6 per cent to Bharat Financial Inclusion Limited over two-week volume weighted price (VWAP).
The Board of Directors of the two companies approved the scheme at their respective meetings.
The merger will be effected through an all-stock transaction. According to the approved scheme, Bharat Financial will be merged with IndusInd and its business correspondent operations will be transferred to a wholly owned subsidiary of IndusInd.
The subsidiary will be incorporated post regulatory approvals for the merger. All the assets and liabilities originated by the business correspondents-wholly owned subsidiary will be booked in the balance sheet of IndusInd.
Post merger, the total assets of IndusInd would jump to Rs 200,820 crore (IndusInd Rs 190,650 crore, Bharat Financial Rs 10,170 crore), and the net worth would be Rs 23,921 crore (IndusInd Rs 21,501 crore, Bharat Financial Rs 2,420 crore).
The loan book size of IndusInd post merger would increase to Rs 126,038 crore while its customer base will go up to 16.3 million with the addition of Bharat Financial's customers numbering around 6.8 million.
Similarly, IndusInd's employee strength would increase to 40,355. Bharat Financial's has an employee strength of 15,284.
Last fiscal Bharat Financial earned a total income of Rs 1,728 crore and a net profit of Rs 290 crore.
However during the first quarter of the current year, the company had posted a loss of Rs 37 crore.
As an integral part of the scheme, there shall be a preferential allotment of warrants to the promoters of IndusInd in accordance with the applicable Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi) guidelines as an anti-dilutive measure.
The scheme is subject to the approval of the RBI, Sebi, the Competition Commission of India, stock exchange(s), shareholders and creditors of IndusInd and Bharat Financial, National Company Law Tribunal and such other regulatory approvals as may be required.
All the employees of Bharat Financial Inclusion Limited will become part of the IndusInd family.
As to the rationale of the merger, Bharat Financial said that it fits with the rural banking and microfinance theme of IndusInd's planning cycle-4 strategy. The merger would provide IndusInd access to best in class micro-lending capabilities and domain expertise in microfinance.
Bharat Financial has 1,408 branches across 347 districts which complements IndusInd Bank's branch network of 1,210 bank branches (including around 250 rural branches) and 999 vehicle finance outlets.
Post-merger, IndusInd will have over 3,600 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," R.Seshasayee, Chairman of IndusInd was quoted as saying in a statement.
"It is a matter of immense pleasure that Bharat Financial Inclusion Limited has taken today its first steps to be a part of a larger banking family. The transaction will bring immense benefits to Bharat Financial Inclusion's vast customer base, staff and shareholders," P H Ravikumar, Chairman, Bharat Financial was quoted as saying in the statement.