India's IndusInd Bank Ltd said on Saturday it has approved a deal to buy Bharat Financial Inclusion Ltd.
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.
The merger scheme will be effective January 1.
The swap ratio works out to be a 12.6 per cent premium to Bharat Financial shareholders over two-week volume weighted average price. Bharat Financial’s stock closed at Rs 1,003.45 a piece, while IndusInd Bank shares had closed at Rs 1,750.15 a piece on Friday.
Following the merger, India’s second largest microfinance company Bharat Financial’s business correspondent operation will be made a subsidiary of the bank and all the employees of th microfinance firm will become IndusInd employees.
Bharat Financial has 1,408 branches across 347 districts, while IndusInd has 1210 branches and 999 vehicle financial outlets. Post-merger IndusInd will have 3,600 plus banking points, the bank said. While the bank has a customer base of 10 million, it will add another 6.8 million customers through the merger.
“The merger is expected to be value accretive from inception given IndusInd Bank’s lower cost of funds, ability to monetise excess PSL (priority sector lending) qualifying assets, efficient capital utilisation and optimal resource utilisation,” the bank said, adding Bharat Financial’s distribution network also also offers large untapped deposit potential from rural and underserved areas, as well as catering to their banking needs.
Morgan Stanley and Arpwood capital Pvt Ltd. Acted as financial advisors to IndusInd, while Credit Suisse advised Bharat Financial for the merger.