AU Small Finance Bank And Fincare SFB Merger Comes Into Effect

The board of AU Small Finance Bank Ltd. has announced the merger of Fincare Small Finance Bank with itself.

The development comes after the Reserve Bank of India granted its approval for the merger on March 4.

With this, all branches of Fincare Small Finance Bank will function as branches of AU Small Finance Bank. 'Fincare Unit' will become the bank's sixth business group.

The board also approved the allotment of 579 shares of AU Small Finance Bank for every 2,000 shares of Fincare Small Finance Bank. The former's paid-up equity share capital will now increase to Rs 742 crore from the previous Rs 669 crore, the filing said.

The allotment, however, includes 135 fully paid-up equity shares of AU Small Finance Bank worth Rs 10 each. These have been allotted to Catalyst Trusteeship Ltd. and Corporate Trustee, according to the defined share exchange ratio.

With the merger, AU Small Finance Bank's pan-India presence also gets a boost. It expects to serve a combined base of more than 1 crore customers, have more than 43,500 employees and have more than 2,350 physical touchpoints.

As of Dec. 31, 2023, the bank's deposit base touched Rs 89,854 crore and the balance sheet became Rs 1,16,695 crore, the exchange filing said.

Following the merger, management rejigs have also taken place, with Rajeev Yadav, former managing director and chief executive officer of Fincare SFB, redesignated as deputy CEO of AU Small Finance Bank.

Other changes include the appointment of Divya Sehgal as non-executive and non-independent director on the bank's board for a period of three years and Uttam Tibrewal as whole-time director and deputy CEO of AU Small Finance Bank.

The exchange filing said the merged entity has set up a task force to ensure transition and minimal customer disruption.

In an analyst call in October, following the merger announcement, Sanjay Agarwal, MD and CEO of AU Small Finance Bank, said it intends to benefit from Fincare's gold loan capability and gross advances.

In the third quarter, AU SFB's net interest income rose 15% year-on-year to Rs 1,325 crore. Other income was up 52% year-on-year to Rs 450 crore, on account of fee income from credit cards and third-party product distribution.

Gross advances increased by 20% year-on-year to Rs 67,624 crore. Asset quality, however, worsened as its gross non-performing asset ratio rose 7 basis points sequentially to 1.98%.