Bank - AU Small Finance Bank

AU Small Finance Bank

 

AU Small Finance Bank was founded by Sanjay Agarwal (managing director and CEO) as a private limited company, and publicly listed in an IPO on 29 June 2017. This Bank is an Indian scheduled commercial bank that was founded as vehicle finance company AU Financiers (India) Ltd. in 1996 and converted to a small finance bank on 19 April 2017. Its headquarters located in

Jaipur, Rajasthan, India. There are 12,572 numbers of employees work in AU Small Finance Bank.

This bank has 100,000 + active internet and mobile banking users. AU means the element gold. Gold is element 79 and its symbol is Au.

AU Small Finance Bank have distribution network of 396 branches, 84 asset centers, 49 business correspondents, 15 offices, 485 ATMs and 625 touchpoints spread contiguously across 11 states in North, West & Central India with over 1.1 million customers.

In March 2018, AU Small Finance Bank became a vehicle finance company almost all the loans made by AU Small Finance Bank were secured, unlike most small finance banks that have unsecured loans due to their background in microfinance. This provides lower interest rates (lower yields) than unsecured loans, so the AU Small Finance Bank has been particularly active in growing its deposits, as bank deposits have lower cost than other sources of funds. It has also sought to diversify into savings products like deposits, payment / transaction banking, distribution of third party products and additional loan products thereby positioning itself as a holistic financial products and services provider. 

Vision: - To be the world’s most trusted retail bank and coveted employer, that is admired as the epitome of financial inclusion and economic success, where ordinary people do extraordinary things to transform society at large, thereby guaranteeing trust, confidence and customer delight.

Mission: - To build one of India’s largest retail franchise that is admired for First, making every customer feel supreme while being served. Second, aspiring that no Indian is deprived of banking. Third, being an equal opportunity employer, providing a collaborative and rewarding platform to all its employees Fastest growth to `1 trillion book size and a client base of 10+ million delighted customers.

In November 2017, the Reserve Bank of India added the bank to its schedule of commercial banks, further improving the bank's growth prospects by reducing the cost of short-term funds and improving the bank's ability to provide services.  

Analysis the Source of Finance of AU Small Finance Bank

Major Source of Finance: - AU Small Finance Bank is listed on NSE & BSE with market capitalization of Rs. 17,000 crores. On its first day of trading, the stock rose 51% to be the most expensive bank in India based on price-to-book. Over the years, the Bank has attracted marquee investors like International Finance Corporation (IFC), Warburg Pincus (New York-based private equity firm focused on growth investing with offices in the United States), Temasek Holdings (Singaporean holding company. It is owned by the Government of Singapore.), Nomura (is a Japanese financial holding company), SBI MF, Kotak Mahindra MF, etc. Private equity companies that provided venture capital including Warburg Pincus and International Finance Corporation. These are the major source of finance of AU Small Finance Bank.

Shares: - AU Small Finance Bank has authorized share capital is Rs.35,00,000,000 (Rupees Three Hundred and Fifty Crore only). The paid-up capital of the Bank as on 31st March 2019 stood at Rs.2,92,35,74,860 (Rupees Two Hundred and Ninety-Two Crore Thirty-Five Lakh Seventy-Four Thousand Eight Hundred and Sixty only) consisting of 29,23,57,486 equity shares at face value of Rs.10 (Rupees Ten) each.

In FY 2017-18, the Bank successfully completed its Initial Public Offer (IPO) of Rs.1,913 crore under ‘Offer for Sale’ structure and the issue were oversubscribed by 54 times with the aggregate demand of Rs.72,331 crore. The equity shares of the Bank were listed and admitted for dealings with BSE Limited (BSE) and National Stock Exchange of India Limited (NSE) on 10th July 2017. There was no change in the authorized share capital of the bank in 2017-18 and 2018-19.

Loans: - AU Small Finance Bank offers a comprehensive portfolio of products and services to their customers including term loan, working capital finance, trade finance and other services including finance to non-banking financial company (NBFCs), microfinance companies, housing finance companies and for construction finance. In the return their charge interest up to 6-7%. From last three years, Compound annual gross rate of AU Small Finance Bank is rose to 7.4% (FY 2018-19) as compare to 6.2% CAGR (FY 2018-19). They also provide Home Loans facilities to its customers.

Gold Loans: - Gold has been one of the oldest forms of collaterals for loans, the organized gold loan segment still has very low penetration. Informal and unregulated players, including local money lenders control about 60% of all gold loan transactions and charge usurious interest rates due to the lack of formal financing channels. AU Small Finance Banks are changing the game by leveraging their presence in the remotest parts, investing in technologies to maximize accessibility and offering tailored schemes with flexible tenors. 

Comparison of Source of Finance of AU Small Finance Bank and Allahabad Bank

1.)    Allahabad bank has a limit of 1 lakh on deposit per account on payment account; AU Small finance bank do not have limit.  AU Small Finance Banks is for small people. Loan amounts are small and cater to the needs of small borrowers. The accept deposit and make small loans. 

 

2.)    As AU Small Finance Bank having an asset or cash reserve in Reserve Bank of India in FY 2017 (Rs. 1,34,304,000), FY 2018 (RS. 49,21,236,000) and FY 2019 (81,11,424,000) While Allahabad Bank has cash reserve in Reserve Bank of India in FY 2017 (RS.

85,857,980,000), FY 2018 (RS. 92,909,660,000) and FY 2019 (RS. 96,723,216,000).

 

3.)    Allahabad Bank has Market Capital Rs. 34441 Cr. as Current Price of each share is Rs. 7.60. The book value of the share is Rs. 20.75 and face value is Rs. 10 in 2020. While AU Small Finance Bank has Market Capital Rs. 15,097 Cr. as Current Price of each share is Rs. 496.40. The book value of the share is Rs. 65.75 and face value is Rs. 10 in 2020.

 

4.)    AU Small Finance Bank charge interest through loans in ending of financial year 2017 is Rs. 704 Cr., In 2018 Rs. 1,361 Cr. and in 2019 Rs. 2,239. The interest rate of AU Small Finance Bank is 8.65% to 11.10% While Allahabad Bank charge interest through loans in financial year 2017 is Rs. 12,373 Cr., In 2018 is Rs. 11,627 Cr., and in 2019 Rs. 11,354 Cr. The interest rate of Allahabad bank is 12.15% to 12.65%.

 

Conclusion

Based on the study conducted it can be concluded that all bank is seen to be taking lot of initiative in attracting customers, stakeholder, big multinational company, helping them financially. This is act as a major source of finance of both these banks and provide expert support. When required to its nearby business units to either setup or expand its operations. 

Allahabad Bank is a public sector bank, so it has abided by the plans that the Government of India makes and help the GOVT to achieve its targets. Both banks have successfully made a positive contribution in the economy of India. Its profit is gradually increasing. But now I think that due to Covid-19 both Bank profit is going to decrease. AU Small Finance Bank plays a great role in collecting scattered Deposit, loan settlement and International trade, etc. 

AU Small Finance Bank and Allahabad Bank ensures quality service to its customers. For better growth and healthy economic position. I hope that AU Small Finance bank come with newer scheme as a to increase more finance, so that they compete with all others bank not even Allahabad bank.

To keep pace with ever changing uncertain domestic business environment and face the challenges of revised global economic scenario, the bank should be more pro-active and responsive to introduce new marketing strategy to hold the strong position to get a source of finance through abroad. I hope both two Banks do more work for socio-economic development besides their banking business.

As Allahabad Bank merger with Indian Bank. The proposed merger would create the seventh largest public sector bank in the country. So many investors like to invest in these types of bank to earn more profits. AU Small bank already win the trust of marquee investors like International Finance Corporation (IFC), Warburg Pincus (New York-based private equity firm focused on growth investing with offices in the United States), Temasek Holdings (Singaporean holding company. It is owned by the Government of Singapore.), Nomura (is a Japanese financial holding company), SBI MF, Kotak Mahindra MF, etc. These sectors are the major source of finance of AU Small bank.