RBI rejection of LVB deal surprising, had govt backing: IndiaBulls MD Banga

A day after the RBI rejected merger proposal with Lakshmi Vilas Bank, Indiabulls Housing Finance on Thursday said the "uncertainty" about the deal is over and that the company has a stronger balance sheet after the massive cleaning up of its stable.

On Wednesday, the Reserve Bank had rejected a proposal to merge Indiabulls Housing Finance Ltd (IBHFL) with the Tamil Nadu-based troubled lender. The deal was announced in April and the no from the Mint Road came despite the plan receiving go-ahead from other regulators.

While acknowledging that the RBI's rejection was a bit surprising, IBHFL vice-chairman and managing director Gagan Banga said however, the uncertainty over the deal has now ended helping them focus more aggressively at what is good at doing.

The uncertainty over the deal as well as legal woes have led to a run on the stock valuations of both the companies which have lost nearly half of their pre-merger-announcement value.

"My view is that, as a housing finance company, we are a lot, lot more stable and stronger now than we were six months ago.

"Our balance-sheet is much thinner and stronger with negligible debt and now our whole energies can be focused to excel more in what we have been excelling in all these years as a housing finance company," Banga told PTI in an interview.

In recent months, IBHFL, which has been in business for nearly two decades, has been selling stakes in realty ventures--a move that has also helped it strengthen its balance sheet in the run-up to the aborted merger.

The objective behind the merger bid was to get better granularity and stability to its funding sources through the savings deposits, Banga said.

"From that perspective, yes, I am a bit disappointed," Banga said even as he added the RBI has a stated position of not allowing NBFCs to take over banks.

"On the other hand, as we waited for the RBI nod, we made a lot of cleaning up of our own stable. We have brought down our commercial paper borrowings to under-Rs 500 crore from a high Rs 15,000 crore since April.

"We have also got rid of our entire debt of our realty arm from Rs 10,000 crore in March 2018 and from Rs 5,000 crore in March 2019 to zero now. Our exposure to commercial reality is down to Rs 7,000 crore or thereabout now," Banga noted.

According to him, another biggest achievement in the past six months was securitisation of its balance sheet to the tune of a full Rs 25,000 crore, which is three times more than what it did in the whole of past three years.

The company has a net worth of around Rs 19,000 crore while liquidity and cash balances is well above Rs 18,000 crore as on date, he said.

Banga said the RBI rejection was a bit surprising for him as the proposal had all the backing of the government, "but at the end of the day, it is the RBI who is the master of the matters like this was also clear and a large number of people, including several quarters in the media, believing that the merger will not go through".

Ever since the merger was announced, IBHFL has faced multiple attacks and they caused a lot of damage to the company, Banga admitted.

"There has been a lot of uncertainty over the last five-six months. Clearly, there was a divided house between those of us who were hoping that the merger would go through... there is no reason that can stop us from growing our assets under management by 20 percent on an annual basis," he said.

IBHFL is facing a public interest litigation in the Delhi High Court which had alleged that monies loaned by Indiabulls to various companies were routed back to its promoters through other entities. The group had called such allegations baseless which were levelled with the intent of stopping the merger process.

Entering the banking space would have given IBHFL access to cheap deposits and saved it from regular crises like being faced by the shadow banks now, while the promise of capital infusion would have helped revive the fortunes of Lakshmi Vilas Bank, which was last month put under the prompt corrective action framework by the RBI.

IBHFL recorded a profit of Rs 4,091 crore in FY19.

LVB to continue fund raising after RBI rejected merger with IndiaBulls

Private sector Lakshmi Vilas Bank on Thursday said Reserve Bank of India's decision not to approve the amalgamation with Indiabulls Housing Finance Ltd has put an end to the uncertainty over the proposed merger, and the lender would continue fund raising.

In a regulatory filing on Thursday, Lakshmi Vilas Bank said the bank acknowledges the decision of Apex bank.

The decision taken by the RBI brings to an end the uncertainty and the financial institution would continue to raise capital as per the permitted modes in compliance with all applicable Acts and Regulations, Lakshmi Vilas bank (LVB) said in a BSE filing.

LVB said with a legacy of more than nine decades, its deposit book was close to Rs 26,000 crore and it had served three generation of clients.

".. we are committed towards growth and creating value to our stakeholders," it said.

Noting that it began its journey in 1926, the bank said it witnessed a lot of business cycles 'punctuated with booms and recession."

"LVB continues to stand resilient and stronger as always. The bank was an early adopter of technology during 1980s towards providing prompt customer service," it said.

The bank commenced branch expansion outside Tamil Nadu in 1974, and currently has 571 branches and 1,045 ATM networks across the country.

Shares of the bank were trading at Rs 25.65 apiece downby 5 per cent over previous close in BSE.

Lakshmi Vilas Bank under pressure as RBI initiates PCA, IBHFL tanks 14%

Shares of Lakshmi Vilas Bank (LVB) and Indiabulls Housing Finance came under pressure in the early trade on Monday after the Reserve Bank of India (RBI) initiated prompt corrective action (PCA) plan on the former.

At 09:49 am, the stock of LVB was locked at the lower circuit limit of 5 per cent at Rs 34.75 apiece on the BSE while that of Indiabulls Housing Finance was trading over 14 per cent lower at Rs 334.15.

Both LVB and Indiabulls Housing Finance are proposed to merge. Last month, Indiabulls Housing Finance said it expects the regulator to take a decision on its merger plan with Lakshmi Vilas Bank in the next two months.

"The company has proposed Sameer Gehlaut as the non-executive chairman and Gagan Banga as the MD and CEO of the amalgamated bank.The Competition Commission of India (CCI) had given its green light to the proposed merger of Indiabulls Housing Finance (IBHFL) and Indiabulls Commercial Credit (ICCL) with Lakshmi Vilas Bank (LVB) in June 2019," said a Business Standard report.

The Competition Commission of India (CCI) had given its green light to the proposed merger of Indiabulls Housing Finance (IBHFL) and Indiabulls Commercial Credit (ICCL) with Lakshmi Vilas Bank (LVB) in June 2019.

In a press release dated September 28, Lakshmi Vilas Bank reassured customers that PCA plan does not mean moratorium on the bank and that bank can transact normal business. "There are no restrictions on operations by depositors. Bank can also undertake lending activities to all segments except corporates and other stressed and high risk sectors," it addded.

The bank further said that the corrective action plan covers various suggestions/measures to recover NPAs, reduce costs, boost capital, downsize RWAs (Risk-weighted assets) and improve profitability and the management was in the process of implementing all these measures. CLICK TO READ FILING

Other Indiabulls group stocks were, too, trading in the negative zone. Indiabulls Real Estate was down 10 per cent at Rs 45.90 apiece on the BSE while Indiabulls Ventures hit lower circuit Rs 123.75, down 20 per cent. On Saturday, Indiabulls Real Estate said shareholders have approved a proposal to sell its London property to promoters for £200 million in an annual general meeting held on September 28.

The resolution to sell the London property has been approved by the requisite majority of shareholders, according to an exchange filing. Earlier, the company had disclosed its plans to focus on its India business and cut down on debt, news agency PTI reported.

Lakshmi Vilas Bank gets shareholders' nod to raise up to Rs 1000 cr

Lakshmi Vilas Bank on Saturday said it has got shareholders' approval to raise up to Rs 1,000 crore by issuance of securities.

The resolution to raise funds by issuance of securities, including American Depository Receipt (ADR) and Global Depository Receipt (GDR), was approved by shareholders in the annual general meeting held on September 27, it said in a regulatory filing.

Shareholders also approved raising authorised share capital from Rs 500 crore, divided into 50 crore equity shares of Rs 10 each, to Rs 650 crore, divided into 65 crore equity shares.