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India’s AU Small Finance Bank to buy peer Fincare in $530 million all-stock deal. Indian lender AU Small Finance Bank said on Sunday it will buy IPO-bound peer Fincare Small Finance Bank in an all-stock deal worth 44.11 billion rupees ($529.80 million), as it seeks to expand its presence in southern India and enter the microfinance space.

Shareholders of Fincare Small Finance Bank, which had filed IPO papers in May, will receive 579 equity shares of AU Small Finance Bank for every 2,000 shares of the former, according to the proposal. Fincare has about 221 million outstanding shares, according to its IPO filing.

After the merger, shareholders of Fincare will hold close to 9.9% in AU Small Finance Bank, according to an investor presentation. The combined entity will have a balance sheet of 1.1 trillion rupees ($13.21 billion).

Shares of AU Small Finance Bank dropped nearly 9% to their lowest since mid-April in Monday trading. The main strategic pivot for AU Small Finance Bank in the deal is an increased focus on unsecured lending, Shailesh Kanani, an analyst at Centrum Broking, said.

This shift could potentially expose the bank to macroeconomic challenges, which, up until this point, it has managed to weather more effectively than its peers, he added.

The transaction will need to be approved by the Reserve Bank of India. The appointed date for the amalgamation is set for Feb. 1, 2024. ($1 = 83.2580 Indian rupees)

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