Money & Banking

Spandana, Share Microfin, Asmita to seek merger nod

G. Naga Sridhar Hyderabad | Updated on March 12, 2018 Published on September 27, 2011




Microfinance institutions (MFIs) Spandana Spoorty, Share Microfin and Asmita are planning to approach the Reserve Bank of India with a merger proposal.

“There is in-principle consensus among the three of us that the merger will be a win-win situation in the present context of challenging environment of microfinance,” Ms Padmaja Reddy, Managing Director of Spandana Spoorty Financial Ltd, told Business Line here.

The three MFIs are among the top five such institutions in the country, along with SKS Microfinance and Bharatiya Samruddhi Financials Ltd of Basix Group.

“We are planning to make a presentation before the Reserve Bank of India as its permission is needed for merger as a regulator of non-banking finance companies,” Ms Reddy said.

The merger will create a mega conglomerate with a portfolio of over Rs 6,000 crore, making it the largest NBFC group in the country with around 30,000 employees.

According to the plan, three NBFCs would be created, including one for Andhra Pradesh portfolio which is under “complete stress now”. “The remaining two will focus on building non-Andhra Pradesh microfinance portfolio and non-micro loans, respectively,” she said.

The basic idea behind the proposal is to segregate ‘toxic portfolio' from other business operations in the three MFIs.

“This will benefit all of us in terms of significantly improved capital adequacy ratio. In addition, securing loans will also not be a problem,” Ms Reddy explained.

Apart from RBI approval, there is also a need to take permission from the consortium of banks that extended corporate debt restructuring packages, which, however, were ‘hinted' at the likelihood of the merger. But this would be done only after ascertaining RBI's view on the proposal, she added.

The promoters of Spandana, Share and Asmita are tight-lipped about the valuations and other financial aspects of the merger plan.

Published on September 27, 2011
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