Kotak Mahindra Bank acquires BSS Microfinance

Kotak Mahindra Bank, the country’s fourth largest private sector lender, has acquired BSS Microfinance in an all-cash deal for Rs 139.2 crore. The bank said with this, it has entered the microfinance space that has been growing at a rapid pace. This acquisition will allow Kotak to tap the lower end of the customer base and will also help the bank in meeting the priority sector lending

(PSL) targets, as BSS’ loans book qualifies for PSL. At the end of the quarter ended June, BSS had microfinance loans of Rs 483 crore in its books and had a net worth of Rs 73 crore. In FY16, BSS had made net profit of Rs 14 crore. The lender has managed to keep its bad loans in check. As of now, BSS has a presence in Karnataka, Maharashtra and Madhya Pradesh. However, after the acquisition, the bank plans to expand the geographical presence.

“This acquisition gives Kotak access to BSS’s growing customer base which currently stands at 217,000 and a network of 78 branches as of June 30, 2016,” said the bank in a release.

Narayan SA, president-Commercial Banking, Kotak Mahindra Bank, said there would not be any management changes and all 740-plus employees of BSS would be absorbed.

“BSS decided to sell out as it was having capital constraints. But now, with Kotak, they will not have any capital constraints and we are really looking at growing this business, as the lender has a robust book and has been growing at 30 per cent,” he added.

Essel Finance was also in talks to acquire BSS. However, the deal couldn’t be completed.

The lender said BSS will become a subsidiary of Kotak after getting the regulatory approvals.

Private banks have increasingly started looking at microfinance companies as acquisition targets. Recently, IDFC Bank also bought over South India-based lender Grama Vidiyal Microfinance for an undisclosed amount and made it a subsidiary.

This comes at a time when the microfinance industry is believed to have had grown at 60 per cent last financial year.

Prior to this, in 2014, Kotak Mahindra Bank had acquired Bengalaru-headquartered ING Vysya Bank in an all-stock deal.

Kotak Mahindra and associates are significant shareholders in Business Standard Private Limited