Kotak Mahindra bank acquires Sonata finance for Rs. 537 crore; plans to diversify its portfolio

Kotak Mahindra bank has recently announced that the company would purchase sonata Finance for 537 crores INR. The acquisition has been made to highlight the company’s expansion in the financial inclusion statement.

In an interview, the bank stated that Kotak Mahindra Bank had conducted a binding share purchase agreement to acquire 100 percent shares of sonata Finance from its existing shareholders. It has met with the regulations and approvals of the RBI. the latter will become the wholly owned subsidiary of Kotak Mahindra Bank after the acceptance takes place and after completing the purchase.

The bank has stated its main am for the acquisition mentioning that Sonata Finance provides the bank to become a key player in the financial inclusion space, and it will allow the bank to meet the needs of the economically lower and weaker sections of society.

Sonata gained assets for 1903 crore INR on December 31, and the management has catered to the needs of about 900,000 customers. The company owns 52 branches in 10 states and has 2882 employees operating under the same. The purchase will provide Kotak Mahindra bank to extend its operations in the rural areas and semi-urban markets in the North. The company’s customer needs meet with Kotak Mahindra bank.

Furthermore, the latter has made plans to include diverse products under the platform. Manish Kothari, the president of commercial banking at Kotak Mahindra Bank, has stated that the purchase has been in line with the company’s strategy.

The bank acquired BCC Microfinance in 2017 and has been integrating other financial sectors and steadily increasing in the financial inclusion sector with an advanced booking of 5300 crores INR.

Anup Kumar Singh, the chief executive and MD of Sonata Finances, has talked about the acquisition stating that the transaction will bring many benefits to the customers, stakeholders, and even the employees. About 59 shareholders acquired 26 million worth of shares of Sonata finance on March 31, 2022. The shareholders included Caspion Advisors, Siddi Trustee Co., and Michael and Susan Dell Foundation. The company has issued debentures accounting for 428 crores INR to investors like global access Fund LP and Northern Arc Capital.

Icra has mentioned that Sonata’s Finance auditors showed delays in refinancing the loans to two banks in the fiscal year 22. However, the management has reported that sufficient funds were present, and the delay must be due to technical issues related to the auto debit of the account.

Kotak Mahindra’s plan to diversify its portfolio by acquisition of businesses:

Previously, Kotak Mahindra Bank said that the company had acquired a health and agriculture equipment finance portfolio accounting for a valuation of 600 crores INR. However, it has mentioned the sum for the deal between the former and the Dutch lender DLL.

The statements from the bank have shown that the acquisition of the bank involves 582 crore INR of existing loans, which are termed as standard, and 69 crores of NPA.

This has helped Kotak to get access to over 25000 high-quality customers, and the acquisition has been the bank’s attempt to dominate its presence in the space. It has mentioned in an interview that the acquisition would allow the bam to look beyond its present niche and diversify its portfolio beyond the metro.

Recently, the private sector bank has stated that the company aims to add more low-cost deposits to its portfolio. The bank will try to maintain its customers by keeping an eye on engaging them through technology and digital initiatives.

The company has recently highlighted the increasing interest rates in its deposit schemes, saying that they experienced growth in fixed deposits but none in savings.

The post covid era proved to be better for consumer banks which were contributed by the formalization of the economy. It has helped private banks assess credit to consumer needs and accelerate the scope of demands. The acquisition indicates that the private sector banks are planning to assert dominance in the suburban and rural areas where their dominance is not prominent.

Sonata Finance is a microfinance firm that operates in rural and semi-urban areas in the North. Acquisition of the firm will provide the bank with the key to operating in those regions, diversifying its portfolio of financers, and gaining wide customers.

Edited by Prakriti Arora