AZB & Partners and Anagram have advised on AU Small Finance Bank’s acquisition of peer Fincare Small Finance Bank for INR44.11 billion (USD529.8 million).
“The Fincare-AU bank merger is the first merger between small banks in India,” said Ankit Mishra, a partner at Anagram Partners.
Partners Shuva Mandal and Mishra led the Angram team advising Fincare, with assistance from associates Vidhisha Ambade, Averal Sibal and Rajni Tolani. Partners Ashwath Rau and Vipul Jain led the AZB team.
“The merger is also significant as it is one of the select few undertaken under a special regulatory window of section 44A of the Banking Regulation Act, 1949, and the only one in recent times,” said Mishra.
He added: “[It] required examination of several aspects such as post-merger governance, the board’s role in the merger process, management considerations for the merged entity, and the interest of minority shareholders, all based on limited precedents … The merger will form the template for future consolidation in the private banking space.”
Fincare is a digitally enabled institution serving 5.4 million customers with a market valuation of INR44.16 billion. AU Small Finance Bank currently holds the highest market capitalisation among its peers at INR460 billion.
The merged entity is expected to have a market capitalisation slightly exceeding the INR500 billion mark, and this strategic move enables AU Small Finance Bank to enter the microfinance sector. More than half of Fincare’s asset portfolio consists of microfinance, catering to low-income individuals or groups facing challenges in accessing traditional bank funding.