Upon the Scheme becoming effective, Bharat Financial Inclusion will stand merged into IndusInd Bank.
“Bharat Financial Inclusion’s shareholders will receive 639 shares of IndusInd for every 1,000 shares of Bharat Financial Inclusion. This implies a premium of 12.6% to Bharat Financial Inclusion over two-week volume weighted price (VWAP),” IndusInd Bank said in a statement.
The merger is expected to be value accretive from inception given IndusInd Bank’s lower cost of funds, ability to monetize excess PSL qualifying assets, efficient capital utilization and optimal resource utilization. Bharat Financial Inclusion’s distribution network also offers large untapped deposit potential from rural and underserved customers as also for their emerging banking needs, it added.
Analyst at IIFL Wealth Management believes that a merger with Bharat Financial Inclusion will uplift core operating profitability of IndusInd Bank, taking it well past the best in the industry.
Though the contribution of micro finance institutions (MFIs) loans will rise from current 2.2% to around 10%, the risk may not increase commensurately as Bharat Financial Inclusion is one of the most diversified MFI regionally and also operationally the most efficient. So the premium being paid to Bharat Financial Inclusion on the current valuation should not deject IndusInd Bank’s investors given significantly structural synergies to be realized from the transaction. Further, the proposed issuance of convertible warrants to promoters should provide comfort, the brokerage firm said in a note.
At 11:01 AM; Bharat Financial Inclusion was up 3% at Rs 1,034 on the BSE. IndusInd Bank was trading 2% lower at Rs 1,713, as compared to 0.15% rise in the S&P BSE Sensex.