AU Small Finance to Acquire Fincare via Share Deal
AU Small Finance Bank is set to buy Fincare Small Finance Bank in a share deal and merge it with itself, subject to regulatory approval. According to the agreement between the two, shareholders of Fincare Small Finance Bank will receive 579 shares of AU Small Finance Bank for every 2,000 shares. The merger would take effect from February 1, 2024, according to the official notification given to the stock exchange late on Oct 30.
The acquisition paves the way for the Jaipur-headquartered African Union to start a microfinance business. When the Reserve Bank of India offered 10 small finance banking licenses in 2015 to promote financial inclusion, AU was the only asset-backed lender without a microcredit legacy. Of the remaining nine operating licenses, eight were given to micro-financiers and one to a local bank.
The acquisition is also the first merger between two small finance banks. This helps AU to expand in the southern market.
AU began operations from Jaipur as a non-bank financier in 2003. At the end of September, AU's gross advances reached 65,029 million kroner, of which 95% were secured credit facilities, and vehicle loans accounted for about a third.
AU started its banking activities in April 2017. Bengaluru-based Fincare's total loan portfolio stood at Rs 7,600 crore at the end of June, of which microfinance accounted for a little over three-quarters. FIncare was built by merging two NBFCs - Future Financial Services and Disha Microfin. In May 2017, Disha received the license of the last small finance bank.