Indiabulls Housing-Lakshmi Vilas Bank merger plan rejected; here’s what happened so far

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Updated: October 10, 2019 12:26:39 PM

Days of uncertainty over Indiabulls Housing-Lakshmi Vilas Bank merger ended after the RBI rejected the proposal on Wednesday, two weeks after prompt corrective action (PCA) was initiated against the financially troubled bank.

RBI initiates prompt corrective action against Lakshmi Vilas BankThe Chennai-based lender had sought the nod from the central bank on May 9, 2019 from the RBI.

Days of uncertainty over Indiabulls Housing-Lakshmi Vilas Bank (LVB) merger ended after the RBI rejected the proposal on Wednesday, two weeks after prompt corrective action (PCA) was initiated against the financially troubled bank. LVB, however, gave no reasons for the rejection of the merger which was announced in April this year. The Chennai-based lender had sought the nod from the central bank on May 9, 2019 from the RBI. The latest move comes as a setback for both firms as the approval was being waited since then. The amalgamation had received all other required approvals. “(T)his is to inform that RBI vide their letter dated October 9, 2019, informed that the application for voluntary amalgamation of lndiabulls Housing Finance Limited and lndiabulls Commercial Credit Limited with the Lakshmi Vilas Bank (LVB) cannot be approved,” LVB said in a regulatory filing.

Taking stock of the situation, Indiabulls Housing said in a regulatory filing, “Now that the merger will not happen with Lakshmi Vilas Bank, the uncertainty of the last five months on the business is lifted and the company will focus on its growth of the core business of housing finance.”

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Troubled LVB

The RBI placed the bank under PCA last month, owing to rising NPAs and inadequate capital to cover risks for the last two years in a row. Even a complaint was filed by the Delhi Police’s Economic Offences Wing against the LVB board accusing its of misappropriation of funds. The bank had posted a net loss of Rs 894.10 crore for FY19.

Indiabulls Housing

The firm is reportedly planning to bring down its stake in the realty business. The Embassy Group recently bought 15 per cent stake in Indiabulls Real Estate Ltd (IBREL).

Shares tank

Since the announcement of the merger in April, the shares of Indiabulls Housing lost nearly 74 per cent and LVB plunged 71 per cent. Shares of Indiabulls Housing were trading at Rs 198, down 41.80, or 17.43 per cent, while LVB shares were at Rs 25.65, down 1.30, or 4.82 per cent on NSE at the time of reporting.

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