AU Small Finance Bank surges 4%; what's driving stock price on Wednesday?

AU Small Finance Bank in focus: The Finance Ministry has increased the foreign investment limit in the private-sector bank from 49 per cent to 74 per cent.

AU Small Finance Bank share price today

 

Shares of AU Small Finance Bank (SFB) hit a new high of ₹1,007.65, surging 4 per cent on the BSE in Wednesday’s intra-day trade after the Finance Ministry increased the foreign investment limit in the bank from 49 per cent to 74 per cent, aligning it with the cap applicable to private sector banks. 

 

In the past two trading days, the stock price of AU SFB has rallied 6 per cent. Further, in the past six months, it has surged 31 per cent, as compared to 3 per cent gain in the BSE Sensex. Thus far in the calendar year 2025, AU SFB has outperformed the market by surging 77 per cent as against a 8.3 per cent rise in the benchmark index.  FOLLOW LATEST STOCK MARKET UPDATES LIVE

 

What's driving the share price of AU Small Finance Bank?

 

AU SFB on Tuesday, December 9, 2025, after market hours said the Bank received approval from Department of Financial Services, Ministry of Finance for an increase in 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.

 

Increased foreign investment limit will assist the Bank in maintaining sufficient headroom for foreign investment in the Bank through permissible mode of investments in compliance of the consolidated FDI Policy read with the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, as amended from time to time, the Bank said in an exchange filing.

 

The relaxation follows the Bank’s transition to a Scheduled Commercial Bank (SCB) and is expected to provide greater flexibility for overseas investors, including FPIs and FIIs, to raise their shareholding. AU SFB has already received strong foreign investor interest over the past two years, and the enhanced limit is expected to support capital-raising, improve liquidity in the stock, and aid long-term expansion plans, ICICI Securities said in a note.

 

According to Motilal Oswal Financial Services, AU SFB remains well-positioned to deliver best-in-class business growth and earnings compound annual growth rate (CAGR), supported by steady improvement in operating metrics and strong execution across its diversified secured businesses. Secured businesses across vehicle finance, mortgages and commercial banking continue to perform well and offer a strong growth outlook in the coming years.  ALSO READ | Groww slips 4% as one-month lock-in ends; here's what analyst suggest 

The Bank’s asset quality cycle is showing signs of bottoming out, with slippages and credit costs moderating in Q2 and cost efficiency in microfinance institution business showing further improvement. This provides confidence that credit costs will remain within the 1 per cent as per FY26 guidance and trend toward the long-term 75-85bp range thereafter, the brokerage firm said.

 

Analysts model 23-24 per cent loan CAGR over FY26-28, supported by strong secured growth engines (VF, mortgages, gold, commercial banking) and normalization in MFI and cards. This, coupled with improving cost efficiency and rising fee income, should drive 34 per cent earnings CAGR over FY26-28E.

 

Notwithstanding the strong rally in the stock price, the brokerage firm remains excited about AU SFB’s growth and earnings prospects and have reiterated it as preferred BUY in the mid-size banking space. Analysts revised the projected target price to ₹1,100 (premised on 3.3x Sep’27E BV).  ==============  Disclaimer: View and outlook shared on the stock belong to the respective brokerages and are not endorsed by Business Standard. Readers discretion is advised.