MUMBAI, Oct 30 (Reuters) – India’s AU Small Finance Bank (AUFI.NS) aims to expand its presence by offering 44.11 billion rupees ($529.8 million) for peer Fincare Small Finance Bank, which is scheduled for an IPO. Acquired in a substantial all-stock transaction. We will enter the microfinance field in southern India.
Shares in AU Small Finance Bank fell nearly 9% on Monday to their lowest since mid-April on concerns that the deal, announced late Sunday, would lead to increased focus on the bank’s unsecured lending. I added.
Banks’ asset quality deteriorated, with provisions for non-performing loans sharply rising in the second quarter. result It was released on Saturday.
Shailesh Kanani, an analyst at Centrum Broking, said AU Small Finance Bank’s main strategic pivot in this deal is an increased focus on unsecured lending.
He added that while the changes could expose the bank to macroeconomic challenges, it has been able to overcome these challenges more effectively than other banks to date.
More than half of Fincare’s asset portfolio consists of microfinance, or lending to low-income individuals and groups who typically have difficulty borrowing money from banks.
Meanwhile, the largest share of AU Small Finance’s loans is vehicle purchase financing.
The partnership announcement comes weeks after Tiger Global-backed fintech Slice announced its merger with Northeast Small Finance Bank, a small lender with operations primarily in the northeastern region of India. I was disappointed.
Fincare Small Finance Bank shareholders, which filed IPO documents in May, will receive 579 shares for every 2,000 shares of AU Small Finance Bank. Fincare has approximately 221 million shares outstanding, according to its IPO filing.
The combined company’s balance sheet will be Rs 1.1 trillion. Fincare shareholders will own nearly 9.9% of AU Small Finance Bank’s shares following the acquisition.
Fincare employees will join AU Small Finance Bank and Rajeev Yadav, CEO of Fincare, will be appointed Deputy CEO of AU Small Finance Bank.
The deal is subject to Reserve Bank of India approval and is subject to a capital infusion of Rs 7,000 crore from Fincare shareholders.
The proposed merger date is February 1, 2024.
(1 dollar = 83.2580 Indian rupees)
Reporting by Ira Dugal and Chris Thomas.Editing: Rashmi Aichi and Mrigank Daniwala
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