In the first such merger between two such banks, AU Small Finance Bank Ltd announced that it will absorb peer lender Fincare Small Finance Bank. 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 held under the amalgamation plan.
These banks were established under an RBI policy in 2014 to promote financial inclusion by providing an outlet for savings and credit to small business units, small and marginal farmers, micro and small industries, and other unorganized sector organizations. While AU Small Finance Bank began operations in April 2017, Disha Microfin (which later merged with Future Financial Services to become Fincare SFB) began operations in July 2017.
"The scheme is subject to approval of the respective shareholders of the transferor company (Fincare Small Finance Bank Ltd) and transferee company (AU Small Finance Bank Ltd), the Reserve Bank of India (RBI) and the Competition Commission of India (CCI)," AU Small Finance Bank Ltd. stated in a regulatory filing late the last day of the week. According to the announcement, the scheme's start date would be 1 February 2024, or a date mutually agreed upon by both companies and approved by the RBI.
AU Small Finance Bank had total assets of 95,977 crore and a net worth of 11,763 crore as of 30 September, while Fincare Small Finance Bank had total assets of 14,777 crore and a net worth of 1,539 crore. While AU SFB shares are traded on public exchanges, Fincare SFB's request for a share sale was approved by market regulator Securities and Exchange Board of India (Sebi) last month.
The banks think the consolidation is "founded on leveraging the significant complementarities that exist between both small finance banks, particularly relating to branch network, product offerings, and customer segments," according to the statement.
"This revenue synergy-led and growth-oriented amalgamation, adopting best practises of banking, technology, governance and prudence from both banks, is expected to result in a superior platform benefitting from efficiencies of size and scope over time for all stakeholders such as customers, employees, and shareholders," according to the statement. Promoters owned 25.49% of AU Small Finance Bank as of 30 September, while 78.58% of Fincare as of 31 March.