Lakshmi Vilas Bank
said in a press note after markets hours to the exchanges on Friday that its board has approved a merger with mortgage financier Indiabulls Housing Finance Ltd in an all-stock deal. The merged entity, to be called Indiabulls Lakshmi Vilas Bank, will be among the top eight private banks in India by size and profitability, Indiabulls Housing Finance
said in a filing.
The shareholders of Lakshmi Vilas Bank (LVB) will get 14 shares of Indiabulls Housing Finance (IBHF) for every 100 equity shares held in the bank, the bank said in a filing.
“The share swap ratio of 0.14:1, or 14 shares of IBH for every 100 shares of LVB, has been agreed upon by the respective boards of directors,” the bank said in a regulatory filing, adding that the deal is subject to regulatory approvals, including that from the RBI.
The two are hopeful of obtaining approvals, going by the precedents — the merger of GRUH Finance with Bandhan Bank, Capital First with IDFC Bank and Bharat Financial Inclusion with IndusInd Bank.
LVB’s board believes that the merger will unlock significant value through synergies and create a diverse retail loan book.
The merger will also increase the geographic presence of the merged entity as Indiabulls has a strong presence in northern and western Indian markets, while LVB has a strong presence in the South.
For Indiabulls, the merger will mean access to low-cost deposits and an expanded distribution franchise. “Cross-sell opportunities created through the merger will help Indiabulls Housing Finance to grow loan book through a suite of consumer loan products, and give it access to new fee generation opportunities. LVB’s shorter tenor loans coupled with Indiabulls’ longer maturity book will ensure ALM (asset liability mismatch) optimization. Diversified loan book will lead to evenly distributed risk profile," the statement said.
“The appointed date for the scheme shall be January 1, 2018, or such other date as may be mutually agreed,” the bank said in the filing.
Gehlaut is proposed to take over as the Vice-Chairman of the amalgamated entity. IBH’s Vice-Chairman and Managing Director Gagan Banga and LVB’s Managing Director Parthasarathi Mukherjee are proposed to be Joint MDs.
As a first step towards the proposed merger, IBH’s board has constituted a reorganisation committee headed by independent director and former RBI Deputy Governor SS Mundra.