IndusInd Bank to acquire Bharat Financial in share swap

Bloomberg

IndusInd Bank Ltd, the lender backed by India’s billionaire Hinduja brothers, is in advanced talks to acquire micro-finance company Bharat Financial Inclusion Ltd in a share swap, people with knowledge of the matter said.
The Mumbai-based IndusInd could announce the purchase in the next month, said the people, who asked not to be identified because the information is private. A deal could value the micro-lender at around 10% above the current market price, one of the people said. Shares of Bharat Financial rose 0.6% to Rs844.45 at 10:02am in Mumbai on Friday, valuing the company at $1.7 billion.
IndusInd, which has more than 9 million customers, wants to target banking clients in rural areas with micro-finance loans, according to a February investor presentation on its website. The bank, led by chief executive officer Romesh Sobti, is considering acquisitions of specialist businesses with proven management and under-penetrated customer bases, the presentation shows.
There is no certainty that the talks will result in a deal, the people said. A representative for IndusInd didn’t immediately respond to an emailed request for comment, while a representative for Bharat Financial said the firm doesn’t comment on market speculation. The talks were first reported by the Economic Times in February, citing unidentified people.

Yunus model
Hyderabad-based Bharat Financial, which started operating in 1998 when it was called SKS Microfinance Ltd, was modeled after Nobel Laureate Muhammad Yunus’s Grameen Bank in Bangladesh. The lender, with an average loan outstanding of Rs16,612 per borrower, focuses on rural customers, according to an
October investor presentation.
Shares of IndusInd fell 0.1% to Rs1,324.45 in morning trading in Mumbai, taking this year’s gain to 20%.
IndusInd management has been authorized to evaluate opportunities to expand the business and enhance shareholder value, according to a statement made to exchanges on Thursday. The board hasn’t made any decision or agreement in relation to any merger or acquisition, according to the filing.