• By Vaamanaa Sethi
  • Mon, 30 Oct 2023 12:25 PM (IST)
  • Source:JND
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Share price of AU Small Finance Bank fell over 8% on Monday, October 30, which is reportedly the lowest mark since mid-April this year. At 10:00 am IST, the shares were trading 8% lower at Rs 630.80 per piece.

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The drop in the share price was followed by announcement by the banking company to  acquire Fincare Small Finance Bank in an all-stock transaction valued at Rs 4,411 crore and that the merger proposal has been approved by its board.

As per the terms of the merger, shareholders of Fincare SFB will receive 579 shares in AU SFB for every 2,000 shares they hold in Fincare SFB. Following the transaction, it is expected that existing shareholders of Fincare SFB will maintain approximately 9.9% ownership in AU SFB.

As per its IPO filing, Fincare presently has around 221 million outstanding shares. After the merger, Fincare's shareholders will hold an ownership interest of roughly 9.9 percent in AU Small Finance Bank, as indicated in an investor presentation. This combined entity will have a robust balance sheet, reflecting assets valued at Rs 1.1 lakh crore.

The successful finalization of this transaction hinges on a number of crucial prerequisites. These prerequisites encompass the necessity for approval from the shareholders of both Fincare SFB and AU SFB, regulatory clearance from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI), and an essential capital injection of Rs. 700 crores by the promoters of Fincare SFB. AU SFB has also assured that all employees of Fincare SFB will be seamlessly integrated into the AU SFB workforce following the merger.

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With a robust footprint in South India, the bank boasts 14,867 employees and a primary emphasis on microfinance loans, as a significant 93.6% of its loans are channeled into rural regions. The bank's total deposits are substantial, standing at Rs 9.453 crore, with 79% of these deposits originating from retail sources. Furthermore, the bank's gross advances total Rs 10.541 crore.