Merger Looms As High Provisions Turn Bharat Financial Unprofitable

Bharat Financial Inclusion Ltd. is considering a merger even as India's fourth largest microfinance lender reported losses in the March-ended quarter on a rise in provisions for bad loans after demonetisation.

The company reported a loss of Rs 234.9 crore compared to a profit of Rs 84.5 crore in the same quarter last year, according to its stock exchange filing.

Provisioning and write-offs for bad debt went up more than 90 times to Rs 334 crore sequentially. The company had warned of high provisioning after demonetisation in an analyst call in March.

The small business lender said that the board has authorised the management to evaluate strategic options like mergers or acquisitions to expand business. This comes almost two months after private lender IndusInd Bank Ltd. confirmed that it is in talks with Bharat Financial, and other entities, for exploring a widely speculated merger.

Bharat Financial's bad loans in the three months ended March went up to 6 percent of the total assets, from 0.06 percent in the previous quarter. In absolute terms, non-performing assets multiplied to Rs 428 crore from Rs 4 crore, the company said in its investor presentation.

However, income from operations rose 22.6 percent year-on-year. It had a cash pile of around Rs 1,941 crore at the end of March.

Read: Bharat Financial Stares At Writeoff As Collections Dry Up In Uttar Pradesh And Maharashtra

In March, it had Rs 306 crore worth of loans for which no payment had been made for over eight weeks. “Installments outstanding for more than three months are very difficult to recover,” brokerage Religare Capital Markets had said. Approximately, 50 percent of the overdue portfolio pertained to Uttar Pradesh and Maharashtra, Bharat Financial had said.