AU Small Finance Bank shares fall over 7% post Fincare merger announcement, quarterly results

As per the deal, AU Small Finance Bank will issue 579 shares of the bank for every 2,000 shares held by shareholders of Fincare, or one share of the bank for every 3.45 shares of Fincare.

Post the transaction, existing shareholders of Fincare will hold 9.9% stake in AU Small Finance Bank.

AU Small Finance Bank has presence in 21 states and three Union Territories with a strong presence in the western, northern and central India, the proposed merger will enhance its reach and distribution and provide the lender with presence in the southern parts of the country. Fincare is present in Andhra Pradesh, Telangana, Tamil Nadu and Karnataka.

Fincare Small Finance Bank is unlisted but has its Non-Convertible Debentures listed on the Bombay Stock Exchange.

As of September 30, Fincare Small Finance Bank had total assets worth Rs 14,777 crore, turnover of Rs 1,360 crore and net profit of Rs 219 crore. For the first half of the current financial year, Fincare had gross NPA of 1.52% and Net NPA of 0.77%.

On a proforma basis, the combined entity is likely to have 2,334 touchpoints, nearly 98 lakh customers and around 43,000 employees. It is also likely to have a combined balance sheet size of over ₹1.1 lakh crore.

AU Small Finance Bank also reported results post market hours on Friday, where the company's asset quality saw deterioration on a sequential basis. Gross NPA stood at 1.91% from 1.76% earlier, while net NPA rose to 0.6% from 0.55% in June. Slippages also rose by 10.1% to ₹349 crore from ₹317 crore in June.

The lender's net interest margin (NIM) stood at a 10-quarter low of 5.5%, while the management has guided for that number to range between 5.7% and 5.9% going forward. Net profit for the quarter grew by 17% year-on-year aided by higher other income, Net Interest Income or NII grew by 15%.

Shares of AU Small Finance Bank are down 7.6% on Monday to Rs 637.70. This is the biggest single-day drop for the stock in 2023.