Kotak Mahindra Bank Buys Out Sonata Finance
The transaction provides the bank with the opportunity to scale up its operations in the rural and semi-urban markets in the northern states of India.
Kotak Mahindra Bank Ltd. has concluded its acquisition of 100% stake in microfinance firm Sonata Finance Pvt.
In a statement to the exchanges on Thursday, the bank said that it acquired the stake for Rs 537 crore.
The assets under management of Sonata Finance, which has operations in 10 states through 549 branches, stood at Rs 2,620 crore as of Dec. 31. With this, Sonata becomes a wholly owned subsidiary of the bank.
The business model mainly focuses on microfinance loans through joint-liability group lending model, which accounted for around 91% of the portfolio, while the remaining 9% was to individual borrowers, according to a Crisil Ratings note issued in January.
As far as asset quality is concerned, as on March 31, 2023, the 90+ days past due stood at 3.3%, which further improved to 3% as on Sept. 30, 2023. Apart from continued focus on collections, the reduction in 90+ dpd was primarily due to the company's decision to write off around Rs 55.6 crore during fiscal 2023, Crisil had said.
The acquisition was first announced in February 2023, where the bank said that it provides a strong platform to become a significant player in the financial inclusion segment. The acquisition is also complementary to Kotak Mahindra Bank's existing microfinance business.
The transaction provides the bank with the opportunity to scale up its operations in the rural and semi-urban markets in the northern states of India. Given the economies of scale and unlocking of efficiencies along with the bank’s own distribution footprint and technology, the transaction will be value accretive from the first day.
In 2016, Kotak Mahindra Bank had bought 99.49% stake in BSS Microfinance Pvt for Rs 139.2 crore. The company had a net worth of Rs 73 crore and microfinance loans worth Rs 483 crore on its books at the time of the acquisition.