Kotak Mahindra Bank acquires microfinance institution Sonata Finance for ₹537 crore

• Sonata Finance will be a wholly owned subsidiary of the bank after receiving regulatory and other approvals.
  
  
• As of Dec 31, 2022, SFPL has an Assets Under Management (AUM) of around ₹1,903 crore, servicing 9 lakh customers.
  
  
• Kotak Mahindra Bank says that the acquisition provides the potential to scale up operations especially in the rural and semi-urban markets in North India.
  

Kotak Mahindra Bank said on Friday that it has executed a binding share purchase agreement to acquire 100% of equity of Sonata Finance for aggregate all-cash consideration of approximately ₹537 crore.

Sonata Finance or SFPL, a microfinance institution will be a wholly owned subsidiary of the bank after receiving regulatory and other approvals. The deal is subject to regulatory and other approvals, including from the Reserve Bank of India.

“SFPL provides a strong platform to enable the bank to become a significant player in the financial inclusion segment, catering to economically weaker and underserved households in a commercially viable manner,” Kotak Mahindra Bank said in a press release.

As of Dec 31, 2022, SFPL has an Assets Under Management (AUM) of around ₹1,903 crore, servicing 9 lakh customers. It has 502 branches across 10 states. This complements with the Kotak Mahindra Bank’s microfinance network, the latter said in a press release.

"Sonata is a leading microfinance player and has built a strong enterprise over the last two decades. We had successfully acquired BSS Microfinance in 2017 and since then have been able to integrate and steadily grow our presence in the financial inclusion segment with an advances book in excess of ₹ 5,300 crore serving around 1.3 million borrowers,” said Manish Kothari, president – commercial banking, Kotak Mahindra Bank.

This acquisition also provides Kotak Mahindra Bank with the potential to scale up operations especially in the rural and semi-urban markets in the northern states of India. The bank said that SFPL is an established microfinance player with deep understanding of customers in these markets.

The bank will also leverage SFPL’s network to provide a wider suite of banking products to SFPL’s customer base. The bank also believes that the acquisition is expected to be value accretive due to the economies of scale and unlocking of efficiencies.

Anup Kumar Singh, CEO and MD of SFPL said that Sonata was started with the objective of providing financing to underserved customer segments. “I believe this mission is best served in a scalable and sustainable manner on a big bank’s platform. I am pleased that current customer households of Sonata will benefit from Kotak Bank’s full range of products, and best-in-class digital services,” he added.