On Sunday, AU Small Finance Bank Ltd announced its intention to merge with fellow lender Fincare Small Finance Bank, marking the first such merger between two institutions of this kind. According to the merger plan, shareholders of Fincare Small Finance Bank will receive 579 equity shares of AU Small Finance Bank Ltd for every 2,000 fully paid-up equity shares they currently hold. Both banks were established to advance financial inclusion by offering opportunities for savings and providing access to credit for small business units, small and marginal farmers, micro and small industries, and other entities in the unorganized sector. This initiative was launched in line with an RBI policy dating back to 2014. AU Small Finance Bank commenced its operations in April 2017, and Disha Microfin (which later merged with Future Financial Services to become Fincare SFB) began its operations in July 2017.
The merger plan is contingent on approval from the respective shareholders of Fincare Small Finance Bank Ltd and AU Small Finance Bank Ltd, as well as regulatory approvals from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI). The appointed date for the scheme will be February 1, 2024, or a date mutually agreed upon by both companies and approved by the RBI. As of September 30, AU Small Finance Bank had total assets of ₹95,977 crore and a net worth of ₹11,763 crore, while Fincare Small Finance Bank had total assets of ₹14,777 crore and a net worth of ₹1,539 crore. AU Small Finance Bank’s shares are listed on the stock exchanges, and Fincare Small Finance Bank’s plan for a share sale received approval from the market regulator, the Securities and Exchange Board of India (SEBI), last month.
The statement emphasizes that the merger is based on the recognition of the significant synergies that exist between both small finance banks, especially in terms of their branch networks, product offerings, and customer segments. Furthermore, it states that this merger, which prioritizes revenue synergies and growth, will incorporate the best practices in banking, technology, governance, and prudence from both banks. This is anticipated to create a stronger platform that will benefit from the advantages of size and scope over time, serving the interests of all stakeholders, including customers, employees, and shareholders. As of September 30, promoters held 25.49% of AU Small Finance Bank, while in the case of Fincare, promoters owned 78.58% as of March 31.