Centrum to merge Micro credit, SME biz with small fin bank for Rs 426 cr

The transfer, via a slump sale is subject to shareholders, statutory and regulatory approvals. Centrum has indicated the transaction would be completed in two months

Centrum Capital Ltd will merge the SME lending business and micro-credit operations of group with the proposed Small Finance Bank for consideration of Rs 426 crore. These businesses are run by two subsidiaries.

In June 2021, The Reserve Bank of India (RBI) gave “in-principle” nod to Centrum Financial Services Ltd (CFSL) to set up SFB). The proposed bank is will take over the beleaguered Punjab and Maharashtra Cooperative Bank (PMC Bank).

Centrum Capital in filing with BSE said its board has approved the transfer business of wholly-owned material subsidiaries - Centrum Financial Services and Centrum Microcredit - to its proposed step-down subsidiary (proposed small finance bank).

The transfer, via a slump sale is subject to shareholders, statutory and regulatory approvals. Centrum has indicated that the transaction would be completed in two months. Its stock closed four per cent higher at Rs 33.9 per share on BSE.

Jaspal Bindra-led Centrum Capital, the holding entity for CFSL, and its partner BharatPe, a payments system company, will infuse Rs 1,800 crore into the small finance bank.

Pooling of the small and medium enterprise (SME) loan business is required to be done as per the in-principle approval from RBI to set up the SFB. This will done at consideration of Rs 316 crore, the company said. Its loan book was Rs 861 crore at end of March 2021.

The blending of Micro credit business will give the proposed Small Finance Bank a significant head-start in its business in preferred areas. The transfer would be done for consideration of Rs 110 crore, it added.