BharatPe Targets PMC Bank in Alliance with Centrum

BENGALURÚ: BharatPe business payments startup and financial services company Centrum Grupo has submitted a joint expression of interest (EoI) to the Reserve Bank of India (RBI) to take over the Punjab and Maharashtra Cooperative (PMC) Bank, a source familiar with the matter. Centrum Group is co-promoted by Jaspal Bindra, a former Standard Collegiate chief. BharatPe and Centrum will participate equally in the company.
Sources added that Ludhiana-born British businessman Sanjeev Gupta’s Liberty House Group also submitted an EoI to the RBI. The central bank has four EoIs for PMC Bank. The identities of the other two contenders are not yet known. On Friday, the RBI extended the restrictions to the PMC bank until March 2021, when it is expected to study the suitors’ proposals.

If successful, an acquisition will boost BharatPe’s loan business. His goal is to build a Rs 5,000 crore loan book in two years. According to a source, the Delhi-based startup of more than two years will bring its technological capabilities to the core financial services expertise of the Mumbai-based Centrum and run it as a small finance bank.
“They want to co-manage it like a digital bank first. For BharatPe, this will reduce the cost of capital. It has wanted to lend on its own, rather than only through its partner NBFC, “said the source. It is currently lending Rs 120-125 crore per month to business partners, who use the platform to accept digital payments.
The invitation document to the EoI said that it will be open to new investors who wish to turn PMC Bank into a small financial bank. Bindra confirmed the development, while BharatPe co-founder and CEO Ashneer Grover declined to comment. A spokesperson for Liberty House also declined to comment.
As of March 2020, PMC Bank had deposits of Rs 10,727 crore, total advances of Rs 4,473 crore, and gross non-performing assets (NPA) of Rs 3,519 crore. The registered capital of the bank is Rs 293 million. But the bank posted a net loss of Rs 6,835 crore during the financial year ending March 2020 with a negative net worth of Rs 5,850 crore.
PMC Bank ran into problems after the detection of financial irregularities and the erroneous notification of loans granted to the real estate developer HDIL.
This has led to several legal cases, but what could be attractive to a potential investor is that PMC Bank also has a network of around 137 branches, including in prime locations in Mumbai, and a depository base that includes individuals from high net worth.