
Fifty-two-year-old Sanjay Agarwal’s journey as an entrepreneur has been incredible. Starting as a direct sales agent, this commerce graduate from Ajmer College and a Chartered Accountancy rank holder, quickly set up a non-banking financial company (NBFC) that later secured a small finance bank licence. Today, the merger of Fincare Small Finance Bank with his bank, AU Small Finance Bank, is a significant milestone in his entrepreneurial journey.
Is a full-scale bank or universal banking licence, like HDFC Bank or ICICI Bank, next on his mind? Agarwal, the managing director and CEO of the Jaipur-headquartered AU SFB, says, “Our focus is more on completeness in terms of product offerings, services, brand, and acceptability. This merger gives us that confidence.”
On a lighter note, Agarwal said, “Everything is possible (a full-scale licence). Possibility keeps us alive. I would say one step at a time. We are not in a hurry.”
He added that the bank should make itself stronger and more complete before thinking of a full-scale licence. “This merger will add to our capabilities,” says Agarwal.
As an entrepreneur, Agarwal will once again have to prove his mettle. Currently, he is running the most successful small finance bank where micro-finance institutions dominate. “Any merger is a challenge. We will focus on successfully integrating and executing the new combined strategy,” says Agarwal.
AU SFB, which has the highest valuation in the market in terms of price to book at 4.20 times, will now have to manage the unsecured microloans business effectively. In fact, the market reacted negatively to the merger, with AU SFB’s share price plunging nearly 4 per cent today.
“If you want to win the World Cup, you have to put the best team forward,” says Agarwal, whose bank is inducting the Fincare CEO Rajeev Yadav as Deputy CEO of the merged entity. Divya Sehgal, a nominee director at Fincare, will also join the AU board to ensure smooth integration.
So far, the bank has largely dealt with secured assets, but it is now a challenge to manage the unsecured portfolio of microloans. Fincare SBF boasts of 5.4 million customers, with a substantial 93.6 per cent of microfinance loans serving rural areas. The bank’s gross advances amount to Rs 10,541 crore, with microfinance constituting 54 per cent, micro-business loans at 19 per cent, affordable housing loans at 14 per cent, and gold loans at 10 per cent.
Agarwal is also gaining access to new geographies, especially in the South and East. The merged entity will have a pan-India presence to explore. This merger significantly expands AU SFB's deposit and asset franchise, with a strong presence in South India. Fincare SFB has a total of 1,292 banking outlets, including 339 in rural areas, 640 in semi-urban areas, 179 in urban locations, and 73 in metro areas.
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