The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
IndusInd Bank Ltd., the Indian lender pursuing a takeover of Bharat Financial Inclusion Ltd., is negotiating a potential deal valuing the microfinance provider at about $2.2 billion, according to people with knowledge of the matter.
IndusInd, backed by the billionaire Hinduja brothers, is discussing a valuation of around 1,040 rupees per Bharat Financial share, according to the people.
That price would represent an 11.3 percent premium to Bharat Financial’s Friday close, data compiled by Bloomberg show.
The two parties plan to structure the deal as a share swap and have reached tentative agreement on the basic outlines of a transaction, the people said, asking not to be identified because the information is private. IndusInd and Bharat Financial said in an exchange filing on Monday they have entered exclusive talks about a strategic combination. Shares of Bharat Financial rose 4.2 percent to 973.80 rupees at 1:45 pm on Monday in Mumbai, putting it on track for the highest close since November 2010.
The purchase will bring IndusInd millions of new customers that it can target with other financial services, the lender’s chief executive officer, Romesh Sobti, said in an interview on Monday. Bharat Financial has already experimented with cross-selling products, according to Sobti.
The purchase will be accretive to earnings from day one, as IndusInd’s cost of funds is hundreds of basis points lower than that of Bharat Financial, Sobti said.
IndusInd’s proposed purchase of Bharat Financial, the biggest acquisition in its history, will require approval from shareholders of both companies as well as regulators, according to Monday’s filing.
The deal may take a few weeks to reach a definitive agreement, though it could spill over into the next quarter as there is some residual due diligence remaining, Sobti said in the interview.
Arpwood Capital Pvt and Morgan Stanley are advising IndusInd, while Credit Suisse Group AG is advising Bharat Financial, the people said. Representatives for IndusInd and Bharat Financial said they couldn’t immediately comment on the valuation and other deal terms.
Bharat Financial, based in Hyderabad, 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.
