On Monday, Kotak Mahindra Bank revealed that its wholly-owned subsidiaries, Sonata Finance Private Ltd and BSS Microfinance Ltd, have both approved a scheme of amalgamation during their respective board meetings. According to the regulatory filing by Kotak Mahindra Bank, the scheme outlines that Sonata will merge with BSS Microfinance Ltd on a going concern basis.
Regulatory and Shareholder Approvals Required
The amalgamation scheme is contingent upon receiving approvals from the shareholders and creditors of both Sonata and BSS, as well as the concerned National Company Law Tribunal (NCLT) and other relevant regulatory authorities.
Financial Overview
As of March 31, 2024, the combined net worth of Sonata and BSS is less than 2 percent of Kotak Mahindra Bank’s net worth. The transaction between Sonata and BSS Microfinance is being conducted at arm’s length, based on a valuation report from an independent registered valuer.
Share Issuance Details
Under the amalgamation scheme, BSS will issue shares to Sonata’s shareholders. Specifically, for every 10,000 shares of face value Rs 10 each held in Sonata, shareholders will receive 1,931 shares of face value Rs 10 each in BSS.
Impact on Kotak Mahindra Bank
The amalgamation involves only the two unlisted subsidiaries, and Kotak Mahindra Bank itself is not a party to the scheme. Consequently, there will be no change in the bank’s shareholding pattern as a result of this transaction.
Role of Sonata and BSS
Both Sonata and BSS act as business correspondents for Kotak Mahindra Bank, providing microfinance, unsecured small-ticket loans, and small-value secured loans to women borrowers and individuals on behalf of the bank.
Net Worth of Subsidiaries
At the end of March 31, 2024, Sonata’s net worth was Rs 389 crore, while BSS’s net worth was Rs 1,010 crore. Kotak Mahindra Bank had announced the acquisition of Sonata Finance in February 2023.
