Utkarsh Small Finance Bank To Evaluate Reverse Merger With Utkarsh CoreInvest

Utkarsh Small Finance Bank Ltd.'s board will evaluate a proposal for a reverse merger with its holding company, Utkarsh CoreInvest Ltd.

The bank received communication of the proposed reverse merger from its holding company, according to an exchange filing on Wednesday.

The proposal for evaluating reverse mergers is subject to regulatory requirements. It would also be to fulfil the Reserve Bank of India's guidelines on the acquisition and holding of shares or voting rights in banking companies, it said.

The guidelines require the entity to dilute promoter shareholding to 26% within 15 years from the date of commencement of banking business.

"The Board of Directors of the Bank will meet in due course and evaluate the proposal and other options to achieve regulatory compliance, taking into account the best interests of the Bank and its stakeholders," it said in the exchange filing.

In the quarter ended December, the bank's net profit rose 23% year-on-year to Rs 116 crore. Net interest income, or core income, stood at Rs 413 crore, up 22.6% year-on-year.

The lender also approved the re-appointment of Govind Singh as the managing director and chief executive for a period of three years, with effect from Sept. 21.

Founded in 2016, Utkarsh Small Finance Bank began operations in its current form in 2017 after regulatory approvals. It was also listed on the exchanges in July 2023. On the NSE, the bank debuted at Rs 40, as compared with the issue price of Rs 25.

In a Jan. 3 note, ICICI Securities expected the bank to sustain a greater than 18% return on equity and 25% plus growth over FY24–26E. The lender's presence in underpenetrated states, enhanced product offerings, and track record of managing asset quality better than peers would aid this, the note said.