Home / News / India /  Kotak to acquire Sonata Finance for 537 crore

Kotak Mahindra Bank is set to acquire Sonata Finance for 537 crore, to expand its presence in the financial inclusion segment, the private sector lender said on Friday.

“Kotak Mahindra Bank has executed a binding share purchase agreement to acquire 100% equity shares of Sonata Finance….from existing shareholders, subject to regulatory and other approvals, including from RBI," it said in a statement. Once approvals are in place and the deal is completed, the Lucknow-based microlender will become a wholly-owned subsidiary of the bank.

Sonata Finance provides a strong platform for the bank to become a significant player in the financial inclusion space, catering to the economically weak and underserved households, the bank added.

As on 31 December, Sonata had 1,903 crore of assets under management and served 900,000 customers via its 502 branches in 10 states, and had 2,882 employees. Sonata’s branch network and customer base complement Kotak’s microfinance network, and this transaction will provide the opportunity to scale the bank’s operations in rural and semi-urban markets in the North, Kotak said.

Besides, Kotak will leverage Sonata’s network to offer a wider suite of products. “This acquisition is in sync with our broad vision and strategy," said Manish Kothari, president, commercial banking, Kotak Mahindra Bank.

In 2017, the bank had also acquired BSS Microfinance, and has been integrating and steadily growing its presence in the financial inclusion segment with an advances book of over 5,300 crore, he added.

“The transaction will bring immense benefits to Sonata’s customers, employees and other stakeholders," said Anup Kumar Singh, chief executive & MD, Sonata Finance.

As on 31 March 2022, 26 mn shares of Sonata were held by 59 shareholders, including Singh, Caspian Advisors, Sidbi Trustee Co and Michael and Susan Dell Foundation. As on 31 March 2022 it had issued debentures worth 428 crore to investors such as Global Access Fund LP, Japan Asean Women Empowerment Fund and Northern Arc Capital, among others. Last October, Icra said that Sonata Finance’s statutory auditor highlighted delays in repayment of loans to two banks in FY22. However, its management said its current account had sufficient funds, but the delay was due to technical issues related to auto debit of the account.

Shayan Ghosh
Shayan Ghosh is a national writer at Mint reporting on traditional banks and shadow banks. He has over a decade of experience in financial journalism. Based in Mint’s Mumbai bureau since 2018, he tracks interest rate movements and its impact on companies and the broader economy. His interests also include the distressed debt market, especially as India’s bankruptcy law attempts recoveries of billions worth of toxic assets.
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