In a significant development within the financial sector, Kotak Mahindra Bank has received regulatory approval from the Reserve Bank of India (RBI) to acquire a complete 100% ownership of Sonata Finance. This strategic move marks a pivotal step for Kotak Mahindra Bank as it endeavors to expand its footprint in the microfinance sector. The acquisition, valued at approximately Rs 537 crore, was originally unveiled in February and has now obtained the crucial RBI endorsement.
Following this acquisition, Sonata Finance will transition into a wholly-owned subsidiary of Kotak Mahindra Bank. This transition is expected to bring substantial changes to the way Sonata Finance operates as it evolves into a business correspondent subsidiary of the bank. Upon the completion of the transaction and the acquisition of any remaining necessary approvals, Sonata Finance will be seamlessly integrated into the operations of Kotak Mahindra Bank.
Sonata Finance has exhibited notable financial performance, with its total income for the fiscal year 2022 amounting to Rs 305.7 crore, a significant increase from Rs 272.2 crore in the previous fiscal year. Furthermore, the company’s bottom line demonstrated remarkable growth, surging to Rs 13.6 crore during the fiscal year 2022, compared to Rs 4.4 crore in the preceding year.
Established in 2006, Sonata Finance is headquartered in Lucknow, India, and primarily operates in 10 states, with a strong focus on the northern regions of the country. It boasts a network of 502 branches and serves nearly 900,000 customers, predominantly comprising women borrowers operating under the joint liability group model. The company’s total loan book size reached Rs 1,903 crore as of December 2022.
Kotak Mahindra Bank envisions that the acquisition of Sonata Finance will yield value and progress. This strategic move is expected to generate economies of scale, unlock efficiencies, and leverage the bank’s extensive distribution network and cutting-edge technology.
Kotak Mahindra Bank initially ventured into the microfinance sector in 2017 through the acquisition of BSS Microfinance. Over time, the bank has significantly expanded its customer base in this sector, now serving over 1 million customers as of Q3FY23.