Kotak Mahindra Bank (KMB), a private-sector Indian bank, recently announced plans to acquire BSS Microfinance, a Karnataka-based non-banking financial company run by the Bharatha Swamukthi Samsthe (BSS) Trust, for INR 1.4 billion (USD 21 million). The deal, which is subject to approval by the Reserve Bank of India (RBI), would result in deposit services being offered to 200,000 customers BSS serves via 78 branches in three states. In advance of the transaction, KMB has 1 percent of its INR 1.7 trillion (USD 25 billion) loan book allocated to microfinance institutions (MFIs).
The cash paid for the acquisition would be used to buy out the 99.5-percent equity stake of Dr. Ramesh Bellamkonda, the managing director of BSS [2]. Narayan SA, BSS President of Commercial Banking, stated that “the acquisition will give KMB deeper reach in the low income segment and allow it to scale up in a direct lending business it was not present in so far. [1]”
As of March 2016, BSS reported total assets of INR 5.3 billion (USD 80 million). As of March 2016, KMB reported total assets of INR 2.4 trillion (USD 36 billion), return on assets of 1.6-percent and return on equity of 11-percent.
By Sharanya Madhavan, Research Associate
About BSS Microfinance
BSS Microfinance is a non-banking microfinance institution based in the Indian state of Karnataka. It was established by Dr. Ramesh Bellamkonda in 1997 as Bharatha Swamukthi Samsthe (BSS) Trust. While its assets were transferred to BSS Microfinance Private Limited in 2008, BSS trust continues to control them. As of March 2016, BSS reported total assets of INR 5.3 billion (USD 80 million) and 200,000 customers spread across 78 branches. The institution does not accept deposits. BSS is in the process of being acquired by Kotak Mahindra bank as of September 2016.
About Kotak Mahindra Bank
Kotak Mahindra Bank is a private bank based in Mumbai, India. It operates under the umbrella of the Kotak Mahindra Group, which also offers stock brokerage, mutual funds, life insurance and investment banking. The bank was originally founded in 1985 as Kotak Capital Management Finance Limited, a non-banking financial organization. In 2003, it was converted into a bank. In November 2009, Kotak Mahindra Bank began participating in the International Finance Corporation’s Global Trade Finance Program, receiving a trade financing line of credit of USD 51 million to lend to small and medium-sized enterprises (SMEs). As of March 2016, KMB reported total assets of INR 2.4 trillion (USD 36 billion), return on assets of 1.6-percent and return on equity of 11-percent.
Sources and Additional Resources:
[1] Financial Express: Kotak Mahindra Bank buys BSS Micro-finance for Rs 139 cr
[2] Economic Times: Kotak acquires BSS MFI for Rs 139 crore
MicroCapital Universe: Kotak Mahindra Bank
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