Photographer: Dhiraj Singh/Bloomberg

IndusInd to Buy Bharat Financial to Boost Microfinance Reach

Updated on
  • Bharat Financial shareholders to get 639 shares for 1,000 held
  • IndusInd, Bharat entered exclusive talks in September

IndusInd Bank Ltd. said it is acquiring Bharat Financial Inclusion Ltd. in an all-stock deal valued at $2.4 billion to expand its reach among India’s low-income borrowers.

Bharat Financial’s shareholders will receive 639 shares of IndusInd for every 1,000 held, according to an exchange filing. The swap valued the Hyderabad-based microfinance provider at a premium of about 11 percent to its Friday closing price.

The purchase will bring IndusInd millions of new customers that it can target with other financial services, the lender’s chief executive officer, Ramesh Sobti, told reporters in Mumbai on Saturday. The purchase will add to earnings from day one, as IndusInd’s cost of funds is much lower than that of Bharat Financial, Sobti said. That will reduce the cost for funds for the combined entity by 3 to 4 percent, he said.

Bharat Financial had 5.3 million active borrowers at the end of March, according to its website. It started operating in 1998, when it was called SKS Microfinance Ltd. The business was modeled after Nobel Laureate Muhammad Yunus’s pioneering Grameen Bank in Bangladesh.

The merger, announced more than a month after the two companies informed the stock exchanges that they have entered exclusive talks about a strategic combination, must be approved by several regulators -- a process that may take up to 10 months, Sobti said.

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