Indiabulls Group shares fall after merger bid fails

The NBFC had failed to secure an universal banking licence earlier

The NBFC had failed to secure an universal banking licence earlier   | Photo Credit: G. R. N. SOMASHEKAR

Housing finance arm’s shares drop 19%

Stocks of the Indiabulls Group tanked after the Reserve Bank of India (RBI) rejected the merger proposal of Indiabulls Housing Finance Ltd. (IHFL) with Lakshmi Vilas Bank (LVB).

On the BSE, the IHFL stock tanked 18.85% to close the day at ₹195 while Indiabulls Ventures fell 8.71% to ₹99.60. Indiabulls Real Estate was down 4.06% at ₹41.35.

“The likelihood of a positive outcome was bleak given the way events were unfolding — litigation and investigation initiated against IHFL, and LVB put under PCA framework recently by the RBI. With this, IHFL’s banking licence aspiration is likely to come to a halt,” broking firm Edelweiss wrote in a note.

The non-banking finance company (NBFC) had applied for a universal banking licence when the RBI invited applications in 2013 but failed to secure one.

The merger was important for the housing finance company and would have given it access to low-cost funds at a time when the non-banking financial sector is facing a crisis of confidence, with banks choking lending to the sector.

LVB shares fell 5% to ₹25.65. The merger was equally crucial for the bank as it was in desperate need of funds, with capital adequacy ratio falling to 6.46%, way below the norms.

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Printable version | May 30, 2020 9:13:08 AM |

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