AU Small Finance Bank-Fincare SFB deal gets RBI nod

The Reserve Bank on Monday gave its approval to the USD 530 million all-stock merger of AU Small Finance Bank and Fincare Small Finance Bank.

The effective date of amalgamation will be April 1 this year, and all the branches of Fincare SFB will function as branches of AU SFB from that day, the Reserve Bank said in a release.

The merger scheme, one of the first such moves in the relatively new SFB space, has been sanctioned in the exercise of the powers contained in sub-section (4) of Section 44A of the Banking Regulation Act of 1949, the central bank said.

The two leaders had announced the deal in late October 2023 and were aiming to close it by February after the mandatory clearances. Under the deal, shareholders of the unlisted Fincare will get 579 shares of the listed AU SFB for every 2,000 shares that they own.

Post-merger, shareholders of FSFB will own 9.9 per cent equity in AUSFB. The promoters of FSFB also agreed to infuse Rs 700 crore of fresh capital into the entity after the deal gets a go-ahead from the RBI and Competition Commission of India.

There was unease among the investors of AUSFB in the immediate aftermath of the deal announcement, and the management had justified the move, calling it a "complementary deal" that will help the Jaipur-based lender gain a foothold in the Southern region and also make inroads into the high-margin microfinance assets business.

Fincare had announced that its plans for an initial public offering (IPO) will go on the back burner following the deal. The merger is set to increase AUSFB's overall staff strength to over 15,000 employees, including 10,000 in the MFI vertical.