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IndusInd Bank likely to merge Bharat Financial with itself: Sources

Indusind bank has been trying to grow the MFI book since last 5 years and the MFI book stands at nearly Rs 3,000cr, which forms about 2.5-3% of its existing loan book.

, ET Now|
Last Updated: Feb 02, 2017, 04.01 PM IST
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Indusind bank also targets to grow microfinance book (MFI book) to Rs 10,000cr over next 3 years.
Indusind bank also targets to grow microfinance book (MFI book) to Rs 10,000cr over next 3 years.
MUMBAI: Indusind Bank is probably one step closer to merging Bharat Financial with itself. Deal likely to be via a share swap between the two entities.

Indusind bank has been trying to grow the MFI book since last 5 years and the MFI book stands at nearly Rs 3,000cr, which forms about 2.5-3% of its existing loan book. Merging Bharat Financial would mean ability to meet priority sector lending norms much easily and also access to a wide distribution network of Bharat Financial in Rural India.

Indusind bank also targets to grow microfinance book (MFI book) to Rs 10,000cr over next 3 years. In its recent Q3FY17 con call management stated that ‘MFI remains very close to hearts, we like the business, we understand the business, we have created a business model which we think is superior, is based on partnerships and business correspondences. So we remain steadfast and we will stay where we are on the microfinance’. Reaching the target via a merger with Bharat Financial will make it reach the goal faster.

As of Dec 2016, Bharat Financial assets under management stand at `8531 cr, with 66 lakh members in Non AP state. The promoter holding is just at 1.66% and it is widely held by public with shareholding of 98.3%.

Most of the key shareholders of Bharat Financial are institutional clients. Although MFI biz of the company has been resilient so far, Overall experience of Note ban has also led to some investor concerns regarding MFI sector being vulnerable to external risks like demonetization, political risks or event like UP elections. Hence, a merger for Bharat Financial will be a matter of wider shareholder agreement.

Merging with a bank would mean access to low cost deposits and also wider scope of growing the book, although regulatory costs like CRR, SLR will apply. Also, Bharat Financial has been aspiring for a bank license earlier, but haven’t got it so far.

Bharat Financial shares gain over 4% on intraday day basis before cooling off a bit, from day's high of `853/share. Shares of Indusind bank down in trade by about 2.2%.

As of writing this story, Bharat Financial says, ‘It is our policy not to comment on speculation’. Still awaiting official response on Email sent to Indusind bank.

In a response to ET NOW, Bharat Financial said, ‘It is our policy not to comment on speculation’.

We would like to clarify that the aforesaid news item is merely market speculation, The company explores various options from time to time and will make an announcement in accordance with the relevant regulations as and when a transaction, if any, is approved by the board, Bharat Financial clarified to BSE.

We further confirm that we have been complying with all our disclosure obligations under applicable law and are not aware of any information that ought to have been disclosed under the relevant regulations but has not been disclosed to the exchange.

As of writing this story, Still awaiting official response on Email sent to IndusInd bank.
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