Indiabulls Housing & Lakshmi Villas Bank to merge

Private sector lender Lakshmi Vilas Bank Ltd on Friday said 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 with stock exchanges. The share swap ratio for the merger has been fixed at 1:014, which means that for every 100 shares of LVB held by shareholders, they will be entitled to receive 14 shares of Indiabulls Housing Finance, according to the exchange filing. As of 31 December, LVB operated 569 branches and 1,046 ATMs across 19 states and one Union territory. Indiabulls Housing Finance is involved in providing home loans, loan against property to retail customer including MSMEs and businesses, lease-rental discounting and construction finance through a network of branches spread across 18 states and three Union territories. “It is third large NBFC merging with Bank this indicates that the September 2018 liquidity issue still persists and NBFC see a better future staying on course in form of banks. This particular merger is announced at 1 share of LVB will get 0.14 shares of Indiabulls Housing which would result in 10.4% dilution approxin Indiabulls Housing Finance. Both have their own major concern, for Indiabulls it is the liquidity as options of raising funds turn costly and less in availability. For LVB it is asset quality and scope of loan growth on that which needs better management.  We have SELL rating on both companies and we see this merger as SLIGHTLY POSITIVE as Indiabulls gets access to low cost of funds and sourcing of fund will not become a problem but asset quality will be the major issue on the consolidated accounts.”Sameer Kalra - Equity Research Analyst and Founder Target Investing.