AU Small Finance Bank-Fincare SFB Merger Gets CCI Approval

The Competition Commission of India (CCI) has given the green light to the merger of Fincare Small Finance Bank (Fincare SFB) with AU Small Finance Bank (AU SFB), according to an exchange filing on Tuesday . The merger, which was announced in October 2023, is expected to create a financial inclusion powerhouse with a pan-India retail banking franchise .

The merger is subject to the approval of the Reserve Bank of India (RBI) and the shareholders of both banks. As per the terms of the scheme of amalgamation, Fincare Business Services Ltd, the promoter of Fincare SFB, will infuse Rs 700 crore into Fincare SFB before the completion of the merger . The shareholders of Fincare SFB will receive 579 shares in AU SFB for every 2,000 shares held in Fincare SFB, resulting in a 9.9% stake in AU SFB post-merger .

The merger will capitalize on the complementary geographic footprint and product basket of the two banks, which offer a range of services such as microfinance, vehicle finance, housing finance, small business loans, savings accounts and fixed deposits. The combined entity will have over 1,000 branches, 3.5 million customers and Rs 60,000 crore in assets .

The merger will also bring synergies in deposits, technology and scale-driven efficiencies over time. AU SFB had a deposit base of Rs 36,286 crore as of September 2023, while Fincare SFB had Rs 7,216 crore. The cost-to-income ratio of AU SFB was 51.8%, while that of Fincare SFB was 58.9%. The merger is expected to improve these metrics and enhance profitability .

Mr Rajeev Yadav, the MD & CEO of Fincare SFB, will be appointed as the Deputy CEO of AU SFB post-merger. He will report to Mr Sanjay Agarwal, MD & CEO of AU SFB. Mr Yadav will continue to lead the Fincare unit of AU SFB, which will house most of the businesses of Fincare SFB. Additionally, he will jointly lead the IT & Digital unit of AU SFB with Mr Agarwal, to ensure smooth IT integration post-merger .

The merger is expected to be completed by March 2024. The appointed date for the merger is February 1, 2024 . With this merger, AU SFB, the largest among small finance banks, will have its market capitalization reach slightly over Rs 50,000 crore . The deal will see AU SFB acquire Fincare SFB for Rs 4,416 crore .

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