Experian has increased its bid to Rs27 from Rs25 per share to buy minimum 26% stake in High Mark, the debt-ridden and cash-strapped credit bureau from India. The question, however, is whether High Mark would exist post the deal or will it be merged with Experian
Experian Credit Information Company of India Pvt Ltd (Experian India), one of the four credit information companies (CICs) in India licensed by the Reserve Bank of India (RBI), 
is about to seal a deal with High Mark Credit Information Services Pvt Ltd (High Mark). The due diligence process initiated by Experian is likely to end by this week, say our sources.
According to the sources, Experian has increased its bid to Rs27 from Rs25 to buy minimum 26% stake in troubled and cash-strapped High Mark. While this deal would allow High Mark to survive, it would allow Experian to strengthen its position in the market. Especially, the microfinance business segment of High Mark would allow Experian access to a new market.
However, whether High Mark would exist as separate credit bureau or would merge its business with Experian cannot be confirmed. According to sources, High Mark may continue to exist to cater to its clients, majority of which are from the microfinance segment.
Talking about the need for CICs to cater to unbanked population, RBI deputy governor Dr KC Chakrabarty had said, “...the key deliverable for the CICs in the coming days would be to facilitate a smoother credit decision making process and, thereby, bring down the cost of financial transactions and credit intermediation in the banking and financial system for the benefit of the masses, especially for the retail and small and medium enterprise (SME) segments.”
“I believe that the next wave of financial innovation would be around providing financial services to a large section of the unbanked population. This would require presence of the necessary tools, techniques, processes, technology, infrastructure and enabling regulations. As most of the target population would be first time credit seekers, it would require an aggregation of information on credit proxies on these individuals. Scoring and evaluation techniques will follow. Banks, insurance and telecom companies will do well in making the best use of the presence of existing CICs in India, during their credit appraisal processes. CICs should, on their part, continuously remain engaged in innovation to support these entities at multiple levels through various value added services and products encompassing their customer's entire life cycle,” Dr Chakrabarty had said at a recent conference.
Coming back to High Mark, last year the credit bureau was negotiating with Italy-based CRIF credit bureau for a bailout. High Mark was offered Rs30 per share by CRIF, which is also an existing shareholder in the credit bureau. CRIF SpA owns 9.09% stake in High Mark. Officials from the Italian credit bureau also met senior executives of the RBI. However, the banking regulator rejected the proposal because of its reservations about CRIF's ownership pattern.
High Mark was negotiating with other credit bureaus to do an asset sale including 250 million records collected from member institutions, says a complaint filed by a former employee of the credit bureau to the finance minister, RBI governor D Subbarao, secretaries from the finance ministry and financial services.
Earlier, while declining to comment on the High Mark deal, Richard Fiddis, managing director for strategic markets at Experian Plc, had said, “Indeed, Experian India—our JV credit information company is going through the process of recapitalization as per our original funding plan for the business and Experian as the cornerstone investor has already contributed its share of the recapitalization funds.”
Experian India is a joint venture of UK-based Experian with Axis Bank, Federal Bank, Indian Bank, Magna Finance, Punjab National Bank, Sundaram Finance and Union Bank of India.
At present, foreign direct investment (FDI) in a credit bureau is capped at 49% and any transfer of more than 5% of shares requires approval from the RBI. Similarly, institutional investment in a credit bureau is capped at 10%.
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