How IndusInd Bank-Bharat Financial Inclusion merger will be mutually beneficial

Non-banking finance company Bharat Financial Inclusion and private sector lender IndusInd Bank are working out details of a merger which will help the latter expand its consumer business.

IndusInd Bank is the country's sixth-largest private sector lender by assets and has a market value of about $16 billion, while Bharat Financial Inclusion, formerly known as SKS Microfinance, is valued at more than $2 billion. We look at the players and prospects of the merger.

• Market analyst SP Tulsian told a business news channel that the deal will be hugely beneficial for the private bank. The merger will lead to an increase in branches, rise in banking customers and increased rural penetration for the bank. Around 68.5 lakh customers will be added to its network. Another advantage of the merger is the bank's loan book will qualify for priority sector lending. Priority sector lending is aimed to provide institutional credit to those sectors and segments for whom it is difficult to get credit. If the merger fructifies, it will be the third deal for IndusInd Bank, after acquisition of Deutsche Bank's credit card portfolio in April 2011 and purchase of diamond and jewellery financing business of Royal Bank of Scotland in India in April 2015.
• For Bharat Financial Inclusion, the deal will ensure more cashless transactions and additional products in the portfolio. Its cost of products will fall, and it will help it handle competition from small finance banks and cut risks. Credit Suisse said in a note last week Bharat Financial was one of the best-capitalised microfinance players in the market, one that was gaining market share. Bharat Financial has 1,408 branches and employs 15,284 people. With 6.8 million customers, it has a loan book of Rs 10,971 crore.
  
• IndusInd Bank logged Rs 836.55 crore in net profit for the quarter ended June 2017 against Rs 751.61 crore in the March Quarter. On an year-on-year basis, the bank recorded 26.48 per cent rise in the June quarter net profit. For fiscal year 2016-17, the bank recorded Rs 2867.89 crore in net profit, a 25.42 percent rise compared with 2015-16 fiscal.
• Bharat Financial Inclusion's loss narrowed to Rs 37.05 crore in the June quarter against Rs 234.92 crore loss in the preceding or March quarter. For the quarter ending June 2016, the firm logged net profit of Rs 235.91 crore. In fiscal year 2016-17, the NBFC logged Rs 289.69 crore in net profit against Rs 302.98 crore in 2015-16.
• The IndusInd Bank stock on Monday logged the biggest one-day gain in percentage terms in the last eight months. The bank's market capitalisation reached Rs 1,07,217.74 crore at the end of trade today. Its market cap rose by Rs 5,644.33 crore today. The stock hit a new 52-week high Rs 1802.65 on the BSE. The stock closed 5.56 percent or 94.25 points higher to 1790.65 level. The Bharat Financial Inclusion stock too hit a fresh 52-week high of Rs 979 on the BSE. It rose 3.34 percent or 31 .30 points higher to 967.25 level on the BSE.