As per the agreement between the two, shareholders of Fincare Small Finance Bank shall receive 579 equity shares of AU Small Finance Bank for every 2,000 shares held. The merger would be effective from February 1, 2024, according to a regulatory filing to stock exchanges late Sunday.
The acquisition will pave the way for Jaipur-headquartered AU’s entry into microfinance business. When the Reserve Bank of India offered 10 small finance bank licences in 2015 to push financial inclusion, AU was the only asset-backed lender without microfinance lineage to receive it. Out of the other nine, eight licences were given to microfinance lenders and another to a local area bank.
The acquisition also marks the first consolidation exercise between two small finance banks. It will help AU’s expansion in southern market.
AU started operation from Jaipur as a non-bank vehicle financier in 2003. AU’s gross advances stood at Rs 65,029 crore at the end of September with 95% secured loan assets and vehicle loans accounting for about one-third of it. AU started its banking operation in April 2017.
The Bengaluru-headquartered Fincare had Rs 7600 crore of gross loan portfolio at the end of June with microfinance contributing a little over three-fourth of it. FIncare was built through the merger of two NBFC-MFIs – Future Financial Services and Disha Microfin. In May 2017, Disha received the final small finance bank licence.