Au Small Finance Bank Ltd. - Quarterly/Annual Result Disclosures and Notes dated 31 Dec 2024

1. The above unaudited financial results have been reviewed by the Audit Committee and approved by the Board of Directors of AU Small Finance Bank Limited (the "Bank") at their meetings held on January 24, 2025, in accordance with the requirement of Regulation 33 and Regulation 52 read with Regulation 63(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended. The financial results have been subjected to limited review by the current joint statutory auditors - M S K A & Associates, Chartered Accountants and Mukund M. Chitale & Co., Chartered Accountants of the Bank, on which they had issued unmodified conclusion. The results pertaining to quarter and nine months ended December 31, 2023 and year ended March 31, 2024 were reviewed / audited by previous joint statutory auditors - Deloitte Haskins & Sells, Chartered Accountants and G.M. Kapadia & Co., Chartered Accountants, on which they had issued unmodified conclusion/opinion.

2. These financial results of the Bank have been prepared in accordance with the recognition and measurement principles laid down in Accounting Standard 25 for “Interim Financial Reporting” (“AS 25”), prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder, in so far as they apply to the Banks, the relevant provisions of the Banking Regulation Act, 1949, the circulars, guidelines and directions issued by the Reserve Bank of India (RBI) from time to time (the “RBI Guidelines”) and other accounting principles generally accepted in India and is in compliance with the presentation and disclosure requirements of Regulation 33 and Regulation 52 read with Regulation 63(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended.

3. The Board of Directors at its respective meetings held on October 29, 2023, approved the scheme of amalgamation (“Scheme”) for the amalgamation of Fincare Small Finance Bank Limited (“Transferor Company” or "Fincare") with AU Small Finance Bank Limited (“Transferee Company” or "AU"), in accordance with Section 44A of the Banking Regulation Act, 1949 and the Reserve Bank of India Master Direction - Amalgamation of Private Sector Banks Directions, 2016.
The Scheme was approved by the shareholders of Transferor Company and Transferee Company on November 24, 2023 and November 27, 2023 respectively at their extra ordinary general meeting and by the Competition Commission of India (the “CCI”) and the Reserve Bank of India (the “RBI”) on January 23, 2024 and March 4, 2024 respectively.
At the request of the Transferor Company and the Transferee Company, RBI approved the appointed date as April 1, 2024.
As per the Scheme, upon its coming into effect from the effective date i.e. April 1, 2024, the entire undertaking of Fincare including all its assets, liabilities and reserves and surplus stood transferred / deemed to be transferred to and vest in AU. Further, in consideration of the transfer of and vesting of the undertaking of Fincare, 579 (Five Hundred Seventy Nine) equity shares of face value of Rs. 10/- each of AU for every 2,000 (Two Thousand) equity shares of face value of Rs. 10/- each of Fincare were issued to shareholders of Fincare on the record date i.e. March 22, 2024. Accordingly 7,35,25,352 equity shares of Rs. 10/- each of AU were allotted at par to the shareholders of Fincare vide board resolution dated April 1, 2024. In addition, the Bank is required to issue its shares on exercise of options which have been granted to the employees of the Transferor Company in terms of its ESOP plan.

Accordingly, the paid-up share capital has increased from Rs. 66,916.25 lakh consisting of 66,91,62,451 equity shares of Rs. 10/- each to Rs. 74,268.78 lakh consisting of 74,26,87,803 equity shares of Rs. 10/- each on April 1, 2024.
The excess of the paid up value of equity shares of Transferor Company over the paid up value of equity shares issued as consideration amounting to Rs. 18,044.82 lakh has been transferred to Amalgamation Reserve as per the Scheme of Amalgamation.

The amalgamation has been accounted using the pooling of interest method under Accounting Standard 14 prescribed under Section 133 of the Companies Act, 2013 (AS-14), “Accounting for amalgamation” and the principles laid down in Clause 20 (b) to (g) of the approved Scheme of Amalgamation.

The assets, liabilities and reserves and surplus of Fincare were recorded by the Bank at their carrying amounts as on April 1, 2024 except for necessary adjustments which were made to bring uniformity of accounting policies as required under AS-14. The net impact of these adjustments has been adjusted in the balance of Profit and Loss Account.

The results for the quarter and nine months ended December 31, 2024 include the operations of erstwhile Fincare Small Finance Bank. Hence the results for the quarter and nine months ended December 31, 2024 are not comparable with that of the corresponding periods of previous year.

4. In compliance with the RBI Investment Master Directions dated September 12, 2023, the Bank has implemented changes relating to classification, measurement and valuation of investments with effect from April 1, 2024. Consequently, the net fair value gain of Rs. 997.71 lakh (net of taxes) has been accounted for in General Reserve as per the transition provision in the aforesaid Directions.
In addition, the Bank has transferred balance in Investment Reserve amounting to Rs. 876.74 lakh on the date of the transition to General Reserve in compliance with these Directions.
Subsequent changes in fair value of performing investments under Available for Sale (AFS) and Fair Value Through Profit and Loss ('FVTPL') (including sub category Held For Trading ('HFT')) categories have been recognised through AFS reserve and Profit and Loss Account respectively. Accordingly, the amounts for periods prior to April 1, 2024 are not comparable.

5. The Bank has applied its significant accounting policies in the preparation of these financial results consistent with those followed in the annual financial statements for the year ended March 31, 2024 except as disclosed in note 4 above. Any circular / direction issued by RBI is implemented prospectively when it becomes applicable, unless specifically required under those circulars / directions.

6. During the quarter and nine month ended December 31, 2024, the Bank has allotted 6,95,628 and 15,45,115 equity shares respectively pursuant to the exercise of options under the approved employee stock option schemes.

7. Other income includes processing fee, profit / loss on sale and revaluation of investments, non-fund based income such as commission earned from guarantees, selling of third party products, income from dealing in PSLC, etc.

8. During the nine months ended December 31, 2024, the Bank has made a contingency provision on Microfinance (MFI) portfolio of Rs. 1,700 lakh.

9. Details of loans transferred / acquired during the nine months ended December 31, 2024 as per RBI Master Direction on Transfer of Loan Exposures dated September 24, 2021 are given below:

(i) During the nine months ended December 31, 2024, the bank has not acquired / transferred any "loans not in default" through assignment of loans.

(ii) During the nine months ended December 31, 2024, the bank has not acquired any stressed loans (Non-performing asset and Special Mention Account).

(iii) Details of MFI Non-Performing Assets (NPAs) transferred to NBFCs under Business Correspondent arrangement during the nine months ended December 31, 2024:
(Rs. in Lakh)
Particulars To permitted transferees
Number of accounts 6,446
Aggregate principal outstanding of loans transferred 1,195.91
Weighted average residual tenor of the loans transferred (In Months) 5.71
Net book value of loans transferred (at the time of transfer) 111
Aggregate consideration (including interest) 1,363.92
Additional consideration realized in respect of accounts transferred
in earlier years Nil

During the nine months ended December 31, 2024, the bank has not transferred any Special Mention Account.

(iv) Details of the recovery ratings assigned to Security Receipts outstanding as at December 31, 2024:
Recovery Rating Rating Agency Anticipated Recovery as per Recovery Rating
RR2 Crisil Ratings More than 75% and upto 100%
RR3 Crisil Ratings More than 50% and upto 75%

10. Information as required pursuant to Regulation 52(4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015:

a. Methodology for computation of the ratios for current year's period is as follows:
Debt-equity ratio Borrowings with residual maturity of more than one year / Sum of Capital and Reserves & Surplus

Total debts to total assets Total borrowings of the Bank / Total Assets

Net worth Calculated as per the Master Circular - Exposure Norms issued by the RBI

b. Basis nature of Bank's business, the ratio's considered to be not applicable are Current Ratio, Long term debt to working capital, Bad Debts to Account receivable ratio, Current liability ratio, Debt turnover, Inventory turnover, Operating margin % and Net profit margin %.

11. The expenses amounting to Rs. 7,680.14 lakh, including stamp duty, has been incurred during quarter ended March 31, 2024 in relation to the acquisition and merger of Fincare Small Finance Bank Limited with the bank. Considering the size, nature or incidence of these expenses, the same has been disclosed as exceptional item for the year ended March 31, 2024.

12. The Capital adequacy ratio ("CAR") has been computed as per operating guidelines for Small Finance Banks in accordance with RBI Circular No. RBI/2016-17/81 DBR.NBD.No.26/16.13.218/2016-17 dated October 6, 2016 and other related guidelines issued thereto.
The Bank has followed Basel II standardized approach for credit risk in accordance with the operating guidelines issued by the Reserve Bank of India for Small Finance Banks. Further, the RBI vide its circular No. DBR.NBD.No.4502/16.13.218/2017-18 dated November 8, 2017 has provided an exemption to all Small Finance Banks whereby no separate capital charge is prescribed for market risk and operational risk.

13. The figures for the quarter ended December 31, 2024 and December 31, 2023 are the balancing figures between year to date figures and half year ended September 30, 2024 and September 30, 2023 respectively. The figures for the quarter ended September 30, 2024 are the balancing figures between half year ended September 30, 2024 and quarter ended June 30, 2024.

14. The Bank does not have any subsidiary/associate/joint venture company(ies), hence consolidation is not applicable.

15. Figures of previous periods/year have been regrouped wherever necessary to conform to current period's classification.

16. Particulars Quarter ended nine months ended
31.12.2024 31.12.2024
Tier I ratio 16.92% 16.92%
Tier II ratio 1.09% 1.09%
Captail Adequacy Ratio 18.01% 18.01%
% of gross NPAs 2.31% 2.31%
% of net NPAs 0.91% 0.91%
Return on assets (average)*^ 0.37% 1.20%
Net worth 16,30,042.62 16,30,042.62
Outstanding redeemable preference shares - -
Capital redemption reserve - -
Debt-equity ratio 0.26 0.26
Total debts to total assets 6.98% 6.98%

* Figures for the quarters / nine months ended are not annualized.
^ For the periods of the current year ROA is computed based on monthly average of total assets as reported to Reserve Bank of India in Form X. For the periods of the previous year ROA is continues to be computed based on Average of Total Assets.