Fincare merger to grow AU SFB's micro loan book

THE PROPOSED MERGER of Fincare Small Finance Bank (SFB) with AU SFB will lead to a higher focus on growing the latter's microfinance (MFI) loan book, MD & CEO Sanjay Agarwal said in a press conference on Monday

- PIYUSH SHUKLA

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"This merger allows us to go to the last mile of the society where we have not reached till now," Agarwal said, adding that the merger brings in experienced officials from Fincare SFB who have witnessed various downcycles of the microfinance business, including the 2010 Assam crisis.

According to the merger agreement, shareholders of Fincare Small Finance Bank will receive 579 equity shares of AU Small Finance Bank for every 2,000 shares held.

The merger is subject to Fincare SFB promoters infusing 700 crore in AU SFB.

AU SFB, despite being the largest lender in that space, does not have a high exposure to the micro loan segment, and focuses predominantly on secured loans.

The lender's overall loans grew 24% year-on-year to ₹65,029 crore as of September end. Of total advances, micro business loans contribute 29%. On the other hand, microfinance loans are the bread and butter of Fincare as they contribute 54% of overall advances whereas micro business loans contribute 19%.