The announcement by AU Small Finance Bank of acquiring Fincare Small Finance Bank will lead to a wider distribution network and immediate boost to the lender's business.
The board of AU Small Finance Bank, late Sunday, announced a scheme of amalgamation with Fincare Small Finance Bank. Through this transaction, for every 2,000 shares held in Fincare SFB, shareholders will receive 579 shares of AU SFB.
The deal is subject to regulatory and shareholders approval. The promoters of Fincare SFB also need to infuse Rs 700 crore to take this transaction forward, AU Small Finance Bank said in an investor presentation.
After this transaction:
Fincare SFB's MD and CEO will become Deputy CEO at AU SFB
All employees of Fincare SFB will be onboarded into AU SFB
Divya Sehgal, currently director in Fincare SFB board will join AU SFB board.
On a proforma basis, the merged entity will have 2,334 touchpoints, around 98 lakh customers and 43,000 employees. The proforma combined balancesheet stands at Rs 1.1 lakh crore as of Sept 30.
Through this deal, AU SFB stands to gain a wider presence into states like Andhra Pradesh, Telangana, Karnataka, Tamil Nadu, Uttar Pradesh and Bihar.
As of Sept. 30, the merged entity is set to have advances worth Rs 75,570 crore, while its deposits will be Rs 85,196 crore.
The merged entity will have a book value per share of Rs 188.8, compared to Rs 176 for AU SFB. The earnings per share will also be higher at Rs 13.6, compared with Rs 11.8, respectively.
About 200 IT professionals at Fincare SFB are set to join AU SFB, which will allow the lender to achieve scale driven cost synergies over time, it said in an investor presentation.
Apart from this, AU SFB will also benefit from diversification, as over 93% of Fincare SFB's business is in microfinance, where the former is not present. AU SFB will also get additional 806 touchpoints in states like Rajasthan, Gujarat, MP and Maharashtra for the microfinance business.
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