Bandhan Bank to acquire Gruh Finance to boost its housing loan business

In a share swap deal, Bandhan Bank is going to acquire Gruh Finance to boost its housing loan business and help it reduce promoter holding as per regulatory requirements.

It has been decided that shareholders of Gruh Finance will get 568 shares of Bandhan Bank for every 1,000 shares held. The merger will be subject to regulatory and shareholder approvals. Gruh Finance is controlled by Housing Development Finance Corporation, India’s biggest mortgage lender.

The deal comes less than a year after Bandhan Bank went public and a little more than three months after the Reserve Bank of India barred Bandhan Bank from opening new branches without its prior approval for failing to bring down the stake of its non-operative financial holding company to 40%, as required under the licensing condition.

According to stock-exchange data, Bandhan Financial Holdings had an 82.28% stake in Bandhan Bank at the end of September. After the merger, the shareholding of Bandhan Financial in Bandhan Bank will reduce to 61%.

Chandrasekhar Ghosh, CEO and managing director at Bandhan Bank confirms that the deal gives the bank an opportunity to build a pan-India affordable housing business. Gruh will get access to a wider distribution network, a larger customer base and low-cost deposit base of Bandhan Bank. The merger will create a rural and semi-urban lending platform in India.

After the merger, Bandhan Bank will have outstanding loan book of Rs 50,036 crore. The loan book would consist of micro loans (58%), retail home loans (28%) and other loans (14%). The combined distribution network will comprise 4,182 banking outlets and 476 ATMs across India. The merged entity will have more than 31,000 employees.