IndusInd Bank has entered into an exclusivity agreement with Bharat Financial to evaluate possibility of a strategic deal between them.
"The Exclusivity Agreement provides for a mutually agreed exclusivity period for due diligence and discussions to evaluate a potential strategic combination between the company and BFIL by way of ambulation through a Scheme of Arrangement, or any other suitable structure," IndusInd said in a release to the exchanges.
The transaction between the two companies would be subject to due diligence, agreement on the appropriate transaction structure, definitive documentation and Board, shareholders, regulatory, NCLT and other third-party approvals, as applicable, the release said.
The release indicates the deal is likely in its final stages, said SP Tulsian of sptulsian.com adding the swap ration will be most important thing to look at.
IndusInd has signed a confidentiality and standstill agreement with Bharat Financial under which pricing and other modalities will be discussed, Romesh Sobti, MD & CEO of IndusInd told CNBC-TV18.
The agreement is valid for more than a week's time. The deal, if goes through, will be complete share swap deal, Sobti said.
Once the deal goes through, BFIL will become a bank, which will give huge benefit to IndusInd's cost of funds. BFIL's cost of funds is likely to fall by 100 basis points post the deal.
Transactions with BFIL will take at least 30 days to complete, Sobti said adding that risk weightage in the microfinance business is 100 percent.
According to a source-based report, the swap ratio being considered is one share of IndusInd Bank for 1.75 shares of Bharat Financial. The deal is likely to be announced by the end of September.
While IndusInd and RBL were both interested in Bharat Financial, IndusInd emerged as the frontrunner, as per CNBC-TV18 sources.
The deal which was under works for a long time had been reportedly called off once in March due to valuation concerns. However, the companies revisited the potential deal since.
Morgan Stanley Mauritius Co. holds a 6.74 percent stake in Bharat Financial Inclusion, while East Bridge Capital Master Fund, Mathews India Fund, Amansa Holding and BNP Paribas Arbitrage own close to 3 percent each.
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