ValuePickr Forum

Bharat Financial (formerly SKS Microfinance) merger with IndusInd Bank

Does anyone see an opportunity to buy BFIL shares from market and get IIB shares based on 1000:639 ratio of exchange announced during the merger? I do not have an idea on how to calculate taking into consideration the current price of both the companies.

Hence not sure if there exists an opportunity to be tapped into.

Welcome comments from those who have explored similar situations.

Disc: Hold IIB shares.

Buying bharat financial gets u indusind at a lower price than the market price

IIB 1647

BFIL 1009

Every BFIL share purchase would be equivalent to getting IIB @ 1579 (1009*1/0.639). So the difference of 68 is probably the time gap difference between today and the consumation of the deal (assuming it goes through). Is there anything else?

Now if the BFIL has a good run until the deal consummated, would that make any difference if it is bought today verses buying it a month or two later, when not all regulatory hurdles have been crossed?

Similarly if IIB does better than BFIL what would be the consequences? Or it doesn’t matter at all?

But the merger date seems to be Jan 1st. What would that mean to all the above assumptions?

What sort of divergence can we use it to our advantage?

Comments are welcome.

The merger also leads to a dilution of 1.8-1.9% of IIB shareholders value. This is indicated in the issue of warrants to promoters of IIB as part of this transaction.

So if I take a 2% dilution of IIB price that would be Rs 33. So the difference shrinks to Rs 35 from Rs 68.

To add to all this, any shares I buy today would get cancelled and replaced by IIB shares. And the fractional difference paid out in cash. Does it impose a STCG on me for the money I would get in this way?

In the end, the thought process of buying BFIL to increase my holdings in IIB doesn’t seem to add a great value.

Let me know how you look at it.