HDFC Mutual Fund raises stake in AU Small Finance Bank; stock rebounds

Shares of AU Small Finance Bank recovered from the day’s low on Friday, February 21, after HDFC Mutual Fund increased its stake in the private sector lender. The fund acquired 50,86,927 shares, representing 0.68 percent of the bank’s equity, bringing its total holding to 4,10,84,599 shares or 5.52 percent of AU Small Finance Bank’s total equity share capital. The acquisition was executed through the open market.

HDFC Mutual Fund’s Growing Stake

Prior to this transaction, HDFC Mutual Fund, along with Persons Acting in Concert (PACs), held 3,59,97,672 shares, accounting for 4.84 percent of the company’s paid-up equity share capital. With the latest acquisition, the fund’s holding surpassed the 5 percent threshold, necessitating disclosure under SEBI’s Substantial Acquisition of Shares and Takeovers (SAST) Regulations, 2011.

The acquisition was carried out under HDFC Mutual Fund and HDFC Trustee Company Limited A/c, with investments spread across various schemes, including: HDFC BSE 500 ETF, HDFC BSE 500 Index Fund, HDFC Arbitrage Fund, HDFC NIFTY Bank ETF, HDFC Banking & Financial Services Fund, HDFC Capital Builder Value Fund, HDFC Balanced Advantage Fund, HDFC Large and Mid Cap Fund, HDFC NIFTY LARGEMIDCAP 250 INDEX FUND, HDFC NIFTY MIDCAP 150 ETF, HDFC NIFTY MIDCAP 150 INDEX FUND, HDFC Multi Cap Fund, HDFC NIFTY500 MULTICAP 50:25:25 INDEX FUND, and HDFC Mid-Cap Opportunities Fund

This investment aligns with HDFC Mutual Fund’s strategic positioning in the financial sector and signals confidence in AU Small Finance Bank’s long-term growth trajectory.

Stock Price Movement

Following the acquisition, AU Small Finance Bank’s stock rebounded sharply. In early trade, the stock fell nearly 2 percent to its intraday low of ₹522 but later surged around 3 percent to hit ₹539 at its high.

Over the past year, the stock has declined by 9 percent. So far in February 2025, it has dropped 11 percent, following a 7.5 percent gain in January.

Financial Performance Highlights

AU Small Finance Bank reported a net profit of ₹528.45 crore for the October-December quarter of FY25 (Q3FY25), marking a 41 percent year-on-year growth from ₹375.25 crore in Q3 FY24. However, sequentially, net profit declined by 7.5 percent from ₹571.2 crore in Q2 FY25.

The bank’s net interest income (NII) surged 53 percent year-on-year to ₹2,022.5 crore in Q3 FY25. However, asset quality deteriorated slightly, with net NPA rising to 0.91 percent from 0.75 percent in the previous quarter. Similarly, gross NPA climbed to 2.31 percent from 1.98 percent in Q2 FY25.

Total income for the quarter stood at ₹4,731.89 crore, reflecting a 49 percent year-on-year growth from ₹3,178.05 crore in Q3 FY24.

AU Small Finance Bank acknowledged economic headwinds, stating, “After seeing some pick-up during the festive season, economic momentum was subdued during the latter part of Q3. However, the overall environment remains relatively better than H1 FY25. Liquidity remained in deficit for most of Q3, leading to consistent pressure on interest rates and deposit growth. Unsecured advances, especially microfinance (MFI), continue to be in a corrective phase across the industry.”

The latest stake increase by HDFC Mutual Fund underscores continued institutional interest in AU Small Finance Bank. Investors will be closely watching the bank’s upcoming quarters to gauge its performance amid the evolving economic landscape.

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