Professional Documents
Culture Documents
JALANDHAR
REGD.NO. 11801726
BBA 5 TH SEMESTER
INTRODUCTION
FOUNDING
IN 1997, inspired by grameen bank, vikram akula founded swayam krishi sangham
as a non-profit organization. however, unlike grameen bank, sks used an aggressive
commission based system to encourage loans, thus forming a network of loan marketers who
were not direct employees of sks, but worked on a commission basis in smaller villages of
andhra pradesh. sks used a network of loan sharks to pursue matters with defaulters.
in 2003, akula created a for-profit arm under the name of sks microfinance private limited. in
order to capitalize the new business, akula established the sks mutual benefit trusts , which
fundraised among women from andhra pradesh villages. the mutual benefit trusts were used
as vehicles to funnel grants for the non-profit sks society to the for-profit sks microfinance, a
move that would be illegal to do directly. in 2005, sks microfinance raises enough funds to
become a non-banking financial company.
PRODUCTS
SKS Microfinance offers life assurance and a variety of financial loans – income
generation loans; mid-term loans; long-term Loans; loans for purchase of products like cook-
stoves, solar lights, water purifiers, mobile phones, bicycles and sewing machines; and loans
secured on gold jewellery. The company lists some of the social benefits of its financial
product and service offerings as "providing self-employed women financial assistance to
support their business with enterprises, such as raising livestock, running local retail shops
called kirana stores, providing tailoring and other assorted trade and services. Loans were
subsequently also offered to men.
INDUSIND BANK AND BHARAT FINANCIAL INCLUSION ANNOUNCE MERGER
Private sector lender IndusInd Bank and Bharat Financial Inclusion Ltd (BFIL)
Wednesday said their merger will be effective from July 4.
The National Company Law Tribunal on June 10, 2019 approved the Scheme of
Arrangement among BFIL, IndusInd Bank and Induslnd Financial Inclusion and their
respective shareholders and creditors.
The Board of Directors of IndusInd Bank Ltd. (“IndusInd”) and the Board of Directors of
Bharat Financial Inclusion Limited at their respective meetings held today, have approved a
merger of the two entities to create a stronger and more sustainable platform for Financial
Inclusion.
The merger will be effected through an all-stock transaction of Bharat Financial Inclusion
Limited into IndusInd through a Composite Scheme of Arrangement (“Scheme”). The
Scheme contemplates merger of Bharat Financial with IndusInd and simultaneous transfer of
Bharat Financial Inclusion Limited’s Business Correspondent operations into a Wholly
Owned Subsidiary of IndusInd, which shall be incorporated after receipt of requisite
regulatory approvals (“BC-WOS”). All the assets and liabilities originated by the BC-WOS
will be booked in the Balance Sheet of IndusInd. As an integral part of the Scheme, there
shall be a preferential allotment of warrants to the Promoters of IndusInd in accordance with
the applicable RBI and SEBI guidelines as an anti-dilutive measure.
The Scheme is subject to the approval of the Reserve Bank of India, the Competition
Commission of India, the Securities and Exchange Board of India / Stock Exchange(s),
shareholders and creditors of IndusInd and Bharat Financial Inclusion Limited, National
Company Law Tribunal and such other regulatory approvals as may be required.
Upon the Scheme becoming effective, Bharat Financial Inclusion Limited will stand merged
into IndusInd and shareholders of Bharat Financial will receive shares of IndusInd in
exchange for shares held by them in Bharat Financial as per the approved Fair Equity Share
Exchange Ratio (“Swap Ratio”).
All the employees of Bharat Financial Inclusion Limited will become part of the IndusInd
family.
MERGER TERMS
Deloitte Haskins & Sells and S.R. Batliboi and Co. LLP, the independent valuers
appointed by IndusInd and Bharat Financial respectively, have recommended a Swap Ratio,
which has been accepted by the respective Boards.
Morgan Stanley India Company Private Limited has provided a Fairness Opinion to IndusInd
and Credit Suisse Securities (India) Private Limited has provided a Fairness Opinion to
Bharat Financial Inclusion Limited.
Accordingly, Bharat Financial Inclusion Limited’s shareholders will receive 639 shares of
IndusInd for every 1,000 shares of Bharat Financial Inclusion Limited. This implies a
premium of 12.6% to Bharat Financial Inclusion Limited over two-week volume weighted
price (VWAP).
Bharat Financial Inclusion Limited fits with the Rural Banking and Microfinance
theme of IndusInd’s Planning Cycle-4 strategy, and will provide IndusInd access to best in
class micro-lending capabilities and domain expertise in microfinance. Bharat Financial
Inclusion Limited has 1,408 branches across 347 districts which complements IndusInd
Bank’s branch network of 1,210 bank branches (including ~250 rural branches) and 999
Vehicle Finance outlets. Post–merger IndusInd will have 3,600+ banking points (excluding
ATMs). IndusInd Bank’s 10 million strong customer base will stand enhanced through the
addition of Bharat Financial Inclusion Limited’s 6.8 million borrowers.
Mr. R. Seshasayee, Chairman, IndusInd Bank, commenting on the announcement said, “The
Board of the Bank believes that the composite scheme of arrangement relating to the merger
of these two illustrious institutions will add value to all stakeholders and the Bank.”
Mr. P.H. Ravikumar, Chairman, Bharat Financial Inclusion Limited, commenting on the
announcement said, “It is a matter of immense pleasure that Bharat Financial Inclusion
Limited has taken today its first steps to be a part of a larger banking family. The transaction
will bring immense benefits to Bharat Financial Inclusion’s vast customer base, staff and
shareholders.
Commenting on the announcement, Mr. Romesh Sobti, MD and CEO of IndusInd Bank, said,
Bharat Financial Inclusion Limited, said, “Access to savings, deposits and other financial
products for all our 6.8 million customers completes our financial inclusion offering.
With IndusInd we will have the advantage of deriving the benefit of a large universal
bank from day 1. Our network, client base and last-mile customer access to 100,000
villages are unique. We are excited with the possibilities the merger will bring.”
REASONS
Seven years ago, on 11 October 2010, the Andhra Pradesh government notified an
ordinance that almost killed SKS Microfinance Ltd (SKS), now known as Bharat Financial
Inclusion Ltd (BFIL). On the same date in 2017, the boards of BFIL and IndusInd Bank Ltd
(IndusInd) approved the merger of the two entities, giving yet another lease of life to India’s
largest micro lender, albeit in a different form. Following the Rs15,486 crore all-stock deal,
for every 1,000 BFIL shares held, an investor in IndusInd will get 639 shares of the bank.
None of BFIL’s 15,284 employees will lose their jobs, at least for the first three years after
the merger is formalized, which is likely to happen by July 2018.
Even the independent directors on BFIL board will become members of the advisory
committee of the business correspondent (BC) subsidiary of IndusInd (the entire operating
infrastructure of BFIL will be a part of this subsidiary, including BFIL employees) for two
years after the merger is completed. The BCs operate as intermediaries between banks and
their customers.
Bharat Financials Earlier Avatar SKS's Quest To Become A Bank Started In ... On The
Same Date In 2017, The Boards Of BFIL And Indusland Bank Ltd ... Besides, At
A Market Capitalization Of Over Rs11, 000 Crore And Book Value .
FINANCIALS POSITION
Sales 851
Other income -
Ebit 601
Interest 180
Tax 99
. Its earlier avatar, SKS was the world’s second microfinance entity (and India’s first) to get
listed on stock exchanges. The stock was mauled within months as the investors en masse
rushed to sell it, following the Andhra Pradesh law which severely clamped down on
microfinance business in the southern state, the hotbed of micro loans those days. The initial
public offering price of SKS was Rs985; on its listing day (16 August 2010) it rose to
Rs1,159, a level it could never reclaim in the past seven years. The stock’s lifetime high has
been Rs1,490.70 (28 September 2010).
a few microfinance entities had to bite the dust following the clampdown, SKS could clean
up its balance sheet as it had money raised from the market at a hefty premium. After seven
successive quarters of losses, it returned to black in December 2012 with a Rs1.2 crore profit.
When the Reserve Bank of India (RBI) opened the window seeking applications for small
finance banks in January 2015, SKS threw its hat in the ring along with 71 others but it could
not make it even though eight of the 10 licence-getters were MFIs. It came very close to
getting it. If market reports are to be believed, the final list was trimmed at the last moment
from 11 to 10 and SKS was out of it, ostensibly because of issues with the promoter, the
sacking of its managing director and chief executive officer who had successfully led the
listing.
There are many reasons for this assumption. For instance, unlike a bank, an MFI does not
have access to cheap public deposits. Besides, no micro borrower can take loans from more
than two microfinance institutions (MFIs), a norm which is not applicable to banks, including
the small finance banks. This “regulatory arbitrage" means that the small finance banks can
poach the customers from MFIs. Also, the spread between the cost of money and the loan rate
for an MFI is capped at 10% (unlike banks which are free to fix the loan rates).
Over the past few years, banks have been successfully leveraging the BC structure permitted
by RBI for originating, collecting and managing micro finance loans through subsidiary and
other alliances. Based on recent research reports, currently only 30% of the small loans are
being disbursed by the MFIs and the rest are done by small finance banks and BCs. A recent
study says the share of the MFIs is slated to come down to 20% in next 18 months.
The demonetisation announcement in November 2016 dealt a body blow to MFIs. The
withdrawal of high-value Rs1,000 and Rs500 notes, 86.9% of the currency in circulation, led
to a nationwide cash crunch, hurting all MFIs as their borrowers primarily deal with cash.
More than the withdrawal of Rs1,000 and Rs500 notes (they were replaced by Rs2,000 and
Rs500 notes but it took time), BFIL (in June 2016 SKS rechristened itself as BFIL) was hurt
because even Rs100 notes disappeared from the market as people started hoarding them.
Unlike banks and BCs, MFIs were not allowed to accept cash from their customers. BFIL
even moved the Prime Minister’s Office, seeking relaxation to accept cash. Since cooperative
banks too were not allowed to handle cash, the norms could not be relaxed for MFIs.
CONCLUSION
REFERENCE
https://m.economictimes.com/industry/banking/finance/banking/indusind-bank-bharat-
financial
https://m.economictimes.com/industry/banking/finance/banking/indusind-bank-bharat-
financial-merger
https://www.moneycontrol.com/india/stockpricequote/finance-general/
bharatfinancialinclusion/SM11.