Laborers work on a commercial building site in the Lower Parel area of Mumbai. (Photographer: Dhiraj Singh/Bloomberg)

Indiabulls Housing Amends Merger Plan With Lakshmi Vilas Bank

Indiabulls Housing Finance Ltd. said it will make some amendments to its proposed merger plan with The Lakshmi Vilas Bank Ltd.

“The scheme, among others, envisages amalgamation of Indiabulls Housing and Indiabulls Commercial Credit into and with Lakshmi Vilas Bank, on ongoing basis and dissolution of IBH and ICCL without being wound up,” the housing finance company said in a notification to stock exchanges on Friday.

When the deal was first announced on April 5, the two parties in a presentation had said that Lakshmi Vilas Bank will amalgamate into Indiabulls Housing Finance, subject to Reserve Bank of India and other regulatory and statutory approvals.

While it is not clear what benefit would accrue from this change, it may prevent a transfer of the bank licence from Lakshmi Vilas Bank to Indiabulls Housing Finance. The RBI typically does not easily permit a transfer of licence. The promoters of Indiabulls Housing Finance, however, would still need clearance from the RBI to hold more than 10 percent in the bank.

“Basis the existing issued capital of both IBH and LBV and the share exchange ratio, the shareholders of the IBH will hold approximately 90.5 percent of the post-merger enhanced equity capital of the merged entity and the shareholders of LVB will hold approximately 9.5 percent of the post-merger enhanced equity capital of the merged entity,” said the exchange filing.

Since IBHFL holds 100 percent of the shares in ICCL, once the scheme of amalgamation becomes effective all shares of ICCL “shall stand cancelled,” the company said in its exchange filing. Further, once the amalgamation between the two companies will take place and LVB issues equity shares to the shareholders of IBHFL, all equity shares of the later would stand “extinguished.”

The board of IBHFL, the regulatory filing said, has reaffirmed the share exchange ratio for the amalgamation. And accordingly, for every one equity share held by shareholders in IBHFL of a face value of Rs 2, they will receive 7.143 equity shares of face value of Rs 10 each in LVB.

ICCL is an NBFC and is a 100 percent subsidiary of IBHFL, its proposed merger along with IBHFL with LVB will be in the overall interest of the company as well as the resultant entity to utilise the available capital more efficiently in LVB rather than under the standalone NBFC. Also, given the regulatory framework governing new private banks, it’s prudent to conduct the lending business under LVB.
Exchange Filing

As per the original deal that was announced in April, the combined entity would have a combined loan book of Rs 1.23 lakh crore and deposits of Rs 30,787 crore. Now, with the Indiabulls group, including ICCL, as part of the merger, an additional Rs 17,105.83 crore worth of assets would form a part of the post-merger entity.

ICCL has a turnover of Rs 1760.6 crore and a net worth of Rs 4,375.06 crore as of March 31, 2019, the exchange filing said. The company mainly focuses on long-term secured mortgage-backed loans.