AU Small Finance Bank shares rise after RBI approves Fincare Small Finance Bank merger

AU Small Finance Bank merger, AU Small Finance Bank share price: AU Small Finance Bank shares registered mild gains on Tuesday, March 5, after the Reserve Bank of India (RBI) approved a $530-million all-stock merger of AU Small Finance Bank and Fincare Small Finance Bank. The AU Small Finance Bank stock rose as much as 1.7 per cent to touch Rs 590 apiece in intraday trade on NSE. On close, the counter shed 1.41 per cent to Rs 571.9 on NSE.

The merger marks a significant milestone in the country’s banking sector, creating a formidable entity with a customer base of more than one crore and a pan-India banking franchise, AU Small Finance Bank said in a regulatory filing on Monday.

AU SFB-Fincare SFB merger: What’s in it for investors?

As part of the amalgamation arrangement, shareholders will get 579 shares of the listed entity, AU Small Finance Bank, for every 2,000 shares owned in the unlisted entity, Fincare Small Finance Bank.

AU Small Finance Bank-Fincare Small Finance Bank merger

Here are some of the key things to know about the proposed merger of Fincare Small Finance Bank with AU Small Finance Bank:

• The effective date of amalgamation will be April 1
• All the branches of Fincare SFB will function as branches of AU SFB
• The development is one of the first such moves in the relatively new SFB space in the country.
• Merger set to increase AU Small Finance Bank’s overall staff strength to over 15,000 employees (including 10,000 in the MFI vertical)
• FSFB shareholders to own 9.9 per cent equity in AU Small Finance Bank post-merger

FSFB promoters have agreed to infuse Rs 700 crore of fresh capital into the entity after the deal gets a go-ahead from the RBI and the Competition Commission of India (CCI), the country’s fair trade regulator.

The two leaders announced the deal in late October 2023, and initially aimed to close it by February after mandatory clearances. There was unease among AUSFB investors in the immediate aftermath of the announcement, but the management justified the move, calling it a "complementary deal" that will help the Jaipur-based lender gain a foothold in the southern regions of the country and also make inroads into the high-margin microfinance assets business.

Fincare had earlier announced that its plans for an initial public offering (IPO) will go on the back burner following the deal.

With inputs from PTI

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