The Reserve Bank of India (RBI) on Monday approved the proposed merger of Fincare Small Finance Bank (SFB) with AU SFB, with the effective date of the merger being set as April 1.
“All the branches of Fincare Small Finance Bank will function as branches of AU Small Finance Bank with effect from April 1, 2024,” the RBI said. The merger proposal was cleared by the Competition Commission of India (CCI) on January 23.
AU SFB on October 30 announced the proposed merger of Fincare SFB with itself. According to the merger agreement, shareholders of Fincare Small Finance Bank shall receive 579 equity shares of AU SFB for every 2,000 shares held. The merger deal is subject to Fincare SFB promoters infusing Rs 700 crore in AU SFB. After the merger, Fincare SFB’s Rajeev Yadav will become the deputy managing director of AU SFB. Shares of AU SFB ended 0.3% higher at Rs 579.80 on the BSE on Monday.
AU SFB, despite being the largest small finance bank, does not have a high exposure to the micro loan segment, and focuses predominantly on secured loans. The lender’s overall loans grew 20% year-on-year to Rs 67,624 crore as of December-end. Of total advances, micro business loans contribute 28%.
On the other hand, microfinance loans are the bread and butter of Fincare as they contributes over 50% of the overall advances, whereas micro business loans contribute nearly 20%.
Even after the merger, AU SFB intends to cap the share of micro loans at 10-11% in its overall portfolio, MD and CEO Sanjay Agarwal had said in a press conference. Acquisition of Fincare SFB will also expand the reach of a pre-dominantly North India–focused AU SFB to the southern parts as Fincare has 49% of its 1,292 branches in those regions.