AU SFB shares hit record high as foreign investment limit raised to 74%

AU Small Finance Bank (AU SFB) saw its shares hitting a fresh all-time high on Wednesday, after the lender received an approval by Department of Financial Services, Ministry of Finance, to increase the foreign investment limit in the bank from 49 per cent at present to maximum permissible limit of 74 per cent of paid up capital of the bank.

The approval is valid without any limitation on the period of its validity. Foreign portfolio investors owned 34.49 per cent in the small finance bank. Foreign companies held 0.34 per cent stake in the bank as of September 30.

Following the development, AU SFB advanced 3.76 per cent to hit a record high of Rs 1,007.65 on BSE. The stock is up 75.21 per cent in 2025 o far against an 8.19 per cent rise in the BSE Sensex during the same period.     

AU SFB received in-principle approval on August 7 to convert into a universal bank, following the RBI’s revised April 2024 guidelines that created a voluntary transition framework for eligible small finance banks with adequate capital, five years of steady operational performance, and satisfactory due-diligence outcomes.

The universal licence removes caps on loan ticket sizes and borrower exposure, opening wider growth avenues. AU has 18 months to complete the transition. Initial gains are expected mainly through lower marketing costs. The bank is also adding staff in underwriting and sales to support expansion into new geographies with a focus on market-share growth.

For now, the bank has maintained its credit cost guidance at 1 per cent. The cost-to-income ratio is expected to remain below 60 per cent in the near term, even as franchise investments continue. NIMs are expected to expand further, with Q2 marking the inflection point amid a better asset mix and deposit repricing, MOFSL noted. 

Besides, MFI book is seen expanding from Q2FY26, and credit cards from Q2 onwards. At the GLP level, growth is expected to remain at 2–2.5x GDP, with momentum strengthening from H2 onwards, aided by a recovery in unsecured lending.