Kotak Mahindra Bank Limited Announces Acquisition of Sonata Finance, a Leading Microfinance Institution

Acquisition offers access to 502 branches across 10 states, adds ~9.0 lakh women customers
Strong presence in rural & semi-urban markets in the northern states of India, complimentary to Kotak Bank microfinance network
Augments Bank’s outreach to underserved customers and drive financial inclusion

Bengaluru: Kotak Mahindra Bank (“KMBL” / “Bank”) today announced that it has executed binding share purchase agreement(s) to acquire 100% of equity shares of Sonata Finance Private Limited (“SFPL”), a Non-Banking Finance Company, classified as an NBFC-MFI, from existing shareholders, subject to regulatory and other approvals, including from Reserve Bank of India.

Transaction Structure and Valuation

The acquisition is for an aggregate all-cash consideration of approximately ₹ 537 crore. With this acquisition, SFPL will be a wholly owned subsidiary of the Bank after receiving regulatory and other approvals.

Strategic Rationale

Financial inclusion: 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.
Complementary branch network: As of Dec 31, 2022, SFPL has an Asset Under Management(AUM) of ~₹ 1,903 crore, servicing a customer base of ~9.0 lacs through a branch network of 502 branches across 10 states, which complements the Bank’s microfinance network.
Potential to scale: The Transaction provides the Bank with the opportunity to scale up its operations in the rural & semi-urban markets in the northern states of India. SFPL is an established microfinance player with almost two decades of experience and a deep understanding of customers in these markets.
Value accretive: The acquisition is expected to be value accretive from inception given the economies of scale and unlocking of efficiencies along with the Bank’s own distribution footprint and technology. The Bank will also leverage SFPL’s network to provide a wider suite of banking products to SFPL’s customer base matching their emerging banking needs.

Manish Kothari, President – Commercial Banking, Kotak Mahindra Bank said, “Sonata is a leading microfinance player and has built a strong enterprise over the last two decades. This acquisition is in sync with our broad vision and strategy. We had successfully acquired BSS Microfinance in 2017 and since then have been able to integrate & steadily grow our presence in the financial inclusion segment with an advances book in excess of ₹ 5,300 crores serving ~1.3 million borrowers. There are significant potential synergies to be realized as a result of this acquisition and we look forward to continue serving the customers in a smooth and consistent manner and ensuring their needs are well-served going forward”.

Mr Anup Kumar Singh, CEO and MD of SFPL said, “I am extremely pleased that Sonata will be in trusted and experienced hands of the Kotak Mahindra Group. Sonata was started with the objective of providing financing to underserved customer segment. I believe this mission is best served in a scalable and sustainable manner on a big bank’s platform. The transaction will bring immense benefits to Sonata’s customers, employees and other stakeholders. 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.”

” I would like to thank all my investors, customers, employees and other stakeholders who contributed in building the Company to this stage.”