AU Small Finance Bank announced the merger of Fincare Small Finance Bank with itself on Sunday night. Confirming businessline’s newsbreak on September 13, AU SFB on social media said that “this strategic merger expands the reach and diversifies offerings, reinforcing our commitment to financial inclusion”. Interestingly, the merger is announced about a month after SEBI okayed Fincare SFB’s IPO filing.
The scheme of merger is subject to approval of the respective shareholders of the AU SFB and Fincare SFB, the Reserve Bank of India and the Competition Commission of India (CCI). According to AU SFB’s exchange filing, the merged entity should take effect from February 1, 2024, suggesting that the deal should conclude in FY24 subject to regulatory approvals.
The share exchange ratio for the amalgamation shall be 579 equity shares of face value of ₹10 each of AU SFB for every 2,000 equity shares of face value of ₹10 each of Fincare SFB.
Accordingly, at these exchange ratios, Fincare SFB is valued at around 3x price to book based on Q2 FY24 financials and AU SFB at approximately 4x price to book.
With a predominantly microfinance oriented book, merger with Fincare SFB will give AU SFB the access to MFI loans and better penetration into the southern markets.
AU Small Finance Bank Limited has total assets of ₹95,977 crore, net worth of ₹11,763 crore as on September 30, 2023, and Turnover of 9,240 crore, profit after tax of ₹1,428 crore for the year ended on March 31, 2023 and ₹789 crore for the half year ended September 30, 2023.
Fincare Small Finance Bank Limited has total assets of ₹14,777 crore, net worth of ₹1,539 crore, turnover of ₹1,360 crore and profit after tax of ₹219 crore as on September 30, 2023, and Total Assets of ₹12,467 crore, net Worth of ₹1,314 crore, turnover of ₹1,970 crore, profit after tax of ₹104 crore for the year ended on March 31, 2023