Fincare SFB to merge with AU Small Finance Bank

Fincare Small Finance Bank (Fincare SFB) is set to merge with AU Small Finance Bank (AU SFB). The merger is expected to become effective on February 1, 2024, subject to all necessary approvals.

In a regulatory filing, AU SFB confirmed its approval of the amalgamation. Under the terms of the merger, shareholders of Fincare SFB will receive 579 shares in AU SFB for every 2,000 shares they hold in Fincare SFB. Following this transaction, it is projected that existing shareholders of Fincare SFB will hold approximately 9.9 per cent  ownership in AU SFB.

Several key conditions must be met for this transaction to proceed, including approval from the shareholders of both Fincare SFB and AU SFB, regulatory approvals from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI), and a capital infusion of Rs 700 crore by the promoters of Fincare SFB.

AU SFB has also confirmed that all employees of Fincare SFB will be integrated into the AU SFB family after the merger.

As part of this strategic merger, the Managing Director & CEO of Fincare SFB is expected to assume the role of Deputy CEO of AU SFB post-merger. Additionally, Divya Sehgal, a current director on Fincare SFB's board, is set to join AU SFB's board, further strengthening the leadership team.

Fincare SFB, a digital-first small finance bank, offers a wide range of deposit and asset products, serving approximately 54 lakh customers. Notably, nearly 93.6 per cent  of its microfinance loans are directed towards rural areas. The bank reports total deposits of Rs 9,453 crore, with 79 per cent  being retail deposits, and gross advances totaling Rs 10,541 crore. 

It operates through 1,292 banking outlets across 23 states and union territories, with a strong presence in South India and a dedicated team of 14,867 individuals.

Upon completion of the merger, the combined entity will have 2,334 touchpoints, serving approximately 98 lakh customers and employing around 43,000 personnel. The combined balance sheet size is expected to exceed Rs 1.1 lakh crores as of September 2023.

The management of AU SFB emphasises the multifaceted strategic rationale behind this merger, highlighting the complementary branch footprint that will establish a truly pan-India Small Finance Bank. The diversification of the portfolio, especially through access to rural and financial inclusion-focussed microfinance businesses, is considered a significant advantage. This merger offers significant opportunities to expand the deposit and asset franchise, particularly in South India, while providing compelling synergies in deposits, technology, and scale-driven efficiencies over time.

(With PTI Inputs)