Fincare Small Finance Bank (Fincare SFB) is set to merge with AU Small Finance Bank (AU SFB) starting from February 1, 2024, pending necessary approvals and regulatory endorsements. This significant merger aims to create a robust financial institution with enhanced capabilities and a broader reach.
Terms of the Merger
- Under the merger agreement, shareholders of Fincare SFB will receive 579 shares in AU SFB for every 2,000 shares they hold in Fincare SFB.
- Post-transaction, existing Fincare SFB shareholders are expected to maintain approximately 9.9% ownership in AU SFB.
Critical Conditions for Completion
- The completion of this merger is contingent upon several crucial conditions, including approval from the shareholders of both banks, regulatory endorsements from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI), and a capital infusion of Rs. 700 crores by Fincare SFB’s promoters.
- AU SFB has confirmed the integration of all Fincare SFB employees into its workforce, emphasizing a seamless transition for the staff.
- As part of the merger, the Managing Director & CEO of Fincare SFB will assume the role of Deputy CEO at AU SFB.
- Additionally, Divya Sehgal, a current director on Fincare SFB’s board, will join AU SFB’s board, enhancing the leadership team.
Operational Highlights of Fincare SFB
- Fincare SFB, a digitally enabled small finance bank, serves approximately 54 lakh customers.
- It predominantly focuses on microfinance loans, with 93.6% of its loans directed towards rural areas.
- The bank operates 1,292 branches across 23 states and Union territories, with plans to expand to a total of 2,334 branches post-merger.
Strategic Rationale and Advantages
Complementary Branch Footprint: The merger establishes a Small Finance Bank with a nationwide presence, leveraging the complementary branch networks of both banks.
- Portfolio Diversification: Access to Fincare SFB’s microfinance businesses enhances AU SFB’s portfolio diversification, especially in rural and financial inclusion-focused sectors.
Expansion Opportunities: The merger presents significant opportunities to expand the deposit and asset franchise, particularly in South India where Fincare SFB has a strong presence.