True North gets 2% in AU Small Finance

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AU Small Finance Bank after its merger with Fincare Small Finance Bank goes through, the private equity firm’s partner Divya Sehgal said in an interview. AU Small Finance Bank announced late Sunday it had agreed to acquire Fincare Small Finance Bank for around $529 million in an-all stock deal. Fincare Small Finance Bank has other investors such as TA Associates, Leapfrog and Tata Capital Financial Services.

Indium IV, which is advised by True North, is also an investor, according to the company’s DRHP. Cumulatively, investors will get around 9.99% once the deal is approved by the regulator. Most of the investors own a stake in Fincare Small Fiannce bank through the promoter entity Fincare Business Services Limited.

“78% of this bank shareholding is in Fincare Business Services Limited, which is the promoter of the bank. Our shareholding is in that, so we would have to liquidate that company (in case we want to exit), as AU shares will sit in that company. That will take around 12 to 24 months, and some of us may want to stay on as shareholders anyway," Sehgal said.

Right now, the plan is to liquidate the promoter entity after the merger closes. Fincare Small Finance Bank secured a Sebi approval for its IPO in September. It was planning to raise ₹625 crore via a primary fund issue.

While Fincare still has the option to list till September 2024, should the merger process be called off, investors are keen to see the deal go through, Sehgal said. “Investors wanted to put in ₹700 crore in the company, because we don’t know how long the approval process can take. The business may need capital, and we want the business to maintain its momentum.