IDFC Bank-Grama Vidiyal deal makes no sense: Hemindra Hazari

IDFC Bank consummated a share purchase agreement today with Grama Vidiyal, a microfinance firm. This is for the first time a bank has acquired a microfinance company in India. Grama Vidiyal, which has 1.2 million customers, with an asset book of Rs 1,500 crore, is expected to be a 100 percent subsidiary of IDFC Bank.  The move is an inch closer to help IDFC Bank realise its dream of building a mass retail bank within 5 years.  CNBC-TV18'S Kevin Lee spoke with Rajiv Lall, MD & CEO of IDFC BANK. Lall said that the bank's goal will be to convert 319 branches of Grama Vidiyal into business correspondents. "We look to complete it within 90 days," he said. Once that conversion is over, the transaction will be consummated, he added.Hemindra Hazari of www.hemindrahazari.com believes that the deal of Rs 1500 crore is just like a drop in the ocean and there is nothing material. "IDFC Bank already has a huge portfolio and the deal doesn't make any sense," he added. Below is the verbatim transcript of Rajiv Lall’s interview to Kevin Lee on CNBC-TV18.Q: How many branches are you looking to add to?A: They have 319 branches which will de facto become points of presence for IDFC Bank. Some sub set of the 319 locations will be converted into full-fledged IDFC branches.Q: Are there any approvals pending this transaction and what is the timeline you are looking at to complete it?A: There are certain minor conditions that need to be met. Our goal is to get this done within 90 days. What will happen is that the 319 locations that Grama Vidiyal is operating from each and every one of them operationally has to be converted into a banking correspondent relationship with IDFC Bank. The moment that is complete then all the conditions will have been met and the transactions will be consummated.