Kotak Mahindra Bank To Acquire Microlender Sonata Finance For Rs 537 Crore
The acquisition will lead to Sonata Finance becoming a wholly owned subsidiary of Kotak Mahindra Bank.
Kotak Mahindra Bank Ltd. has entered into a binding agreement to acquire Sonata Finance, a microfinance lender for Rs 537 crore.
The all-cash deal will involve Sonata Finance becoming a wholly owned subsidiary of Kotak Mahindra Bank, according to the bank's exchange filing on Friday. The deal is subject to regulatory approvals, including from the Reserve Bank of India.
As on Dec. 31, Sonata Finance had assets under management worth Rs 1,903 crore and a customer base of 9 lakh women. It had 502 branches spread across 10 states.
For the year-ended March 2022, Sonata Finance's net profit stood at Rs 13.6 crore, compared with Rs 4.4 crore a year ago. Total income rose 12.3% year-on-year to Rs 305.7 crore.
Sonata Finance is registered as a non-banking financial company-micro finance institution with the Reserve Bank of India and was incorporated in 1995, with microlending operations starting in 2006, according to an October 2022 credit rating report from ICRA Ltd.
The lender offers loans to women engaged in income-generating activities including manufacturing, processing, services activities and animal husbandry. Sonata Finance's loan portfolio was concentrated in Uttar Pradesh, Bihar and Madhya Pradesh as of December 2021, the ICRA report noted.
The acquisition provides Kotak Mahindra Bank with the opportunity to scale up its operations in the rural and semi-urban markets in the northern states of India, the bank said in its statement.
"We had successfully acquired BSS Microfinance in 2017, and since then have been able to integrate and steadily grow our presence in the financial inclusion segment, with an advances book in excess of Rs 5,300 crore, serving 1.3 million borrowers," Manish Kothari, president of commercial banking at Kotak Mahindra Bank, said in a statement. "There are significant potential synergies to be realised as a result of this acquisition."
Kotak Mahindra Bank's advances in the retail microfinance segment grew by 121% year-on-year in the October-December quarter to Rs 5,338 crore.
The acquisition is expected to be value-accretive from the start as the microfinance company's branch network will help the bank improve its distribution strategy. Kotak Mahindra Bank will also offer banking services to Sonata Finance's customers.