Kotak acquires BSS MFI for Rs 139 crore

MUMBAI: Kotak Mahindra Bank is paying Rs 139 crore to acquire Karnataka based non banking micro finance company BSS Microfinace in an all cash deal.

The acquisition which is subject to Reserve Bank of India (RBI) approval will give the private sector lender 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 said Narayan SA, president commercial banking, Kotak Mahindra.

"It gives us the ability to get into a space where we were not involved directly. We believe there is huge opportunity to scale up this business," Narayan said.
BSS will now be a subsidiary of Kotak.

Direct lending in the micro finance sector is growing at a rapid 80% while BSS is growing at a quick 30%.

The company had a loan book size of Rs 483 crore as of June through lending to joint lending groups of women with a average ticket size of Rs 22,000 per borrower.

Kotak Mahindra itself has never lent to micro finance but has a loan outstanding of Rs 1,500 crore through lending to these companies and buying their securities.

However, that is less than 1% of the bank's Rs 1,70,000 crore loan book.

BSS currently has a network of 78 branches with 2.17 lakh customers spread across Karnataka, Maharashtra and UP.

Besides the customers Kotak will also be able to enhance its mandatory priority sector exposure.

Kotak will retain all 728 employees of BSS, while the company's founder and chairman Ramesh Bellamkonda will continue to be on the board.

"Until now we have been hobbled woth constraints of equity capital. The deal not only helps us overcome this constraint but also allows us to offer savings products in conjunction with Kotak Mahindra," Bellamkonda was quoted as saying in a release.

Bellamkonda has signed a non compete clause with the bank which is valid for 45 months.