Kotak Mahindra Bank Acquires Sonata Finance

In a strategic move, Kotak Mahindra Bank has successfully acquired Sonata Finance Private Limited (Sonata) for a total consideration of approximately Rs. 537 crore. This acquisition grants Kotak Mahindra Bank full ownership of Sonata, bolstering its presence in the microfinance sector.

Sonata Finance: A Microfinance Powerhouse

• Sonata Finance is a Non-Banking Finance Company – Micro Finance Institution (NBFC-MFI) registered with the Reserve Bank of India (RBI).
• As of December 31, 2023, Sonata boasted an impressive Asset Under Management (AUM) of approximately Rs. 2,620 crore.
• Sonata operates across 10 states through a network of 549 branches, providing microfinance services to underserved communities.

Kotak’s Microfinance Expansion Strategy

• The acquisition of Sonata was previously announced by Kotak Mahindra Bank in February 2023 and October 2023, signaling the bank’s intention to expand its microfinance operations.
• With the acquisition now finalized, Sonata’s extensive microfinance network becomes part of the Kotak Mahindra Bank umbrella, strengthening the bank’s presence in the microfinance sector.

Reshuffling Insurance Business

In a separate development, earlier in February 2024, Kotak Mahindra Bank decided to give up its majority stake in the general insurance business. The private sector lender announced that Zurich Insurance will acquire a 70% stake in the bank’s general insurance arm, Kotak Mahindra General Insurance, for ₹5,560 crore in a single tranche.

This move follows the bank’s November 2023 announcement of selling a 51% stake in Kotak Mahindra General Insurance to Zurich Insurance for ₹4,051 crore through a combination of fresh capital infusion and share purchase. The remaining 19% stake was supposed to be sold within a period of three years.

Kotak Mahindra Bank’s acquisition of Sonata Finance and the reshuffling of its insurance business demonstrate the bank’s strategic efforts to expand its microfinance operations while realigning its focus in the insurance sector.