Kotak Bank to Merge Sonata Finance with BSS Microfinance

Kotak Mahindra Bank announced on Monday that Sonata Finance Private Ltd and BSS Microfinance Ltd, both its wholly-owned subsidiaries, have approved a merger scheme. This decision was made during their respective board meetings. According to the regulatory filing, Sonata will merge with BSS Microfinance Ltd as a going concern.

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The merger scheme requires approval from the shareholders and creditors of both Sonata and BSS. Additionally, it needs the nod from the National Company Law Tribunal (NCLT) and other regulatory authorities. The combined net worth of Sonata and BSS is less than 2% of Kotak Mahindra Bank's net worth as of March 31, 2024.

Valuation and Share Issuance

The transaction between Sonata and BSS Microfinance is based on an arm's length price, determined by an independent registered valuer's report. As part of the amalgamation scheme, BSS will issue and allot shares to Sonata's shareholders in the ratio of 1,931 shares of face value Rs 10 each in BSS for every 10,000 shares of face value Rs 10 each held by them in Sonata.

Kotak Mahindra Bank clarified that it is not a party to this scheme since it involves two unlisted subsidiaries. Consequently, there will be no change in the bank's shareholding pattern due to this amalgamation.

Business Operations

Both BSS and Sonata serve as business correspondents for Kotak Mahindra Bank. They provide microfinance services, unsecured small-ticket loans, and small-value secured loans to women borrowers and individuals on behalf of the bank. As of March 31, 2024, Sonata's net worth stood at Rs 389 crore, while BSS had a net worth of Rs 1,010 crore.

Kotak Mahindra Bank had announced its acquisition of Sonata Finance in February 2023.