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AU Small Finance Bank tumbles 6% on Fincare SFB merger announcement

Oct 30, 2023

By: BlinkX Research Team

The Board of Directors of AU Small Finance Bank Ltd and the Board of Directors of Fincare Small Finance Bank Ltd have approved an all-stock merger of both the banks.

Post this announcement, shares of AU Small Finance Bank tumbled over 6% at ₹649 per share, during mid-afternoon trade on the BSE.

According to the regulatory filing, upon obtaining the required approvals, Fincare SFB shall merge into AU SFB and Shareholders of Fincare SFB shall receive shares of AU SFB in exchange for theirsharesin Fincare SFB at the approved share swap ratio. All employees of Fincare SFB shall become part of the AU SFB family.

The Boards of AU SFB and Fincare SFB respectively considered the results of due diligence of key aspects of each other’s business operations.

According to terms, Fincare Business Services Ltd (“FBSL”), promoter of Fincare SFB, shall infuse ₹700cr into Fincare SFB prior to the completion of the merger.

Further, the merger aids diversification of AU SFB’s portfolio with addition of rural, inclusion focused microfinance, mortgages, and gold loan businesses of Fincare SFB, bolstering its financial inclusion charter with a focus on micro entrepreneurs and small enterprises. 

The merged entity will leverage Fincare SFB’s distribution network in rural and semi-urban and AU SFB’s strong product and digital capabilities to grow its deposits and lending franchise.

The merger will deliver significant synergies especially in deposits, technology and scale driven efficiencies and over time will be accretive to key financial metrics, the company said on Monday.