AU SFB to focus on integration over the next 9-12 months

The merger, approved by the Reserve Bank of India on Tuesday, is expected to provide AU with access to Fincare’s specialized portfolios in microfinance and gold loans, while giving a foothold in southern India. 

Despite these new capabilities, Agarwal specified that the bank intends to maintain the expansion of the microfinance loan book within the southern region for the time being. Agarwal said the integration will take between nine and twelve months to complete.

“What we want to really integrate is 30 to 35 branches which are in more urban locations as we have built our deposit franchise well in terms of customer centricity. So, I don’t think that we want to really extend the microfinance book or product to our branches as of now,” Agarwal said in an interview with Mint.

Following the merger, the combined entity’s microfinance loan book is expected to constitute 8% of the total balance sheet, with plans to cap it at 10%. 

The merged entity will have more than 98 lakh customers, pro forma gross advances of ₹75,570 crore, more than 43,000 employees, and 2,334 touchpoints across 25 states and union territories.

AU SFB’s primary focus post-merger will be on the integration of personnel and IT systems, followed by a review and alignment of processes, policies, and business priorities, including the consolidation of the deposit franchise.

As part of the deal, the promoters of Fincare SFB, Fincare Business Services Ltd, is expected to bring in ₹700 crore. Agarwal clarified that the funds will be infused before 1 April, which is the effective date for the merger.

On 29 October 2023, the boards of AU SFB and Fincare SFB entered into an all-share deal to merge both the entities. Under the amalgamation plan, shareholders of Fincare Small Finance Bank will get 579 equity shares of AU Small Finance Bank Ltd for every 2,000 fully paid-up shares they own. Post-merger, existing shareholders of Fincare SFB shall hold around 9.9% in AU SFB.

Shares of AU Small Finance Bank closed at ₹571.70 on the BSE on Thursday, up 0.94% from their previous close in a positive market.

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Published: 07 Mar 2024, 06:03 PM IST