India's Bandhan Bank gears for $11.7b merger

The deal will create one of India’s largest rural and semi-urban lending platforms.

Bloomberg reports that India’s newest lender, Bandhan Bank Ltd., is combining with mortgage financier Gruh Finance in a $11.7b deal that aims to meet the central bank’s ownership guidelines. 

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Investors in Gruh Finance will get 568 shares of Bandhan Bank for every 1,000 they own, according to exchange filings from the companies.

The transaction is meant to help Bandhan Bank founder and CEO Chandra Shekhar Ghosh comply with the Reserve Bank of India’s (RBI) ownership rules and allow the micro lender to expand into a new category of loans. 

“Diluting shareholding is just one benefit of this merger; the main purpose is to grow our business in the best way possible,” Ghosh said. “We have a strong presence in the east of the country, Gruh has a good network in the west. It is good for both of us.”

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The RBI slapped penalties on Bandhan Bank after it missed a deadline in September to bring Ghosh’s holding down to 40% in line with its ownership guidelines. The central bank also froze any further increase in salary and withdrew the bank’s right to open new branches without the need for prior approval.

“This merger will create one of the largest rural and semi-urban lending platforms in India,” said Deepak Parekh, chairman of Gruh’s parent HDFC.

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