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LVB approves Rs190 cr preferential issue to Indiabulls Housing Finance

23 Apr 2019


South-based private sector lender Lakshmi Vilas Bank (LVB) is pushing ahead with a planned merger with Indiabulls Housing Finance Ltd through issue of 16.8 million preferential shares, comprising 4.99 per cent of the bank’s equity, worth Rs190 crore, even as the Reserve Bank of India is closely examining the fit-and-proper criteria of Indiabulls Group to acquire a bank or any financial institution.

The board of LVB on Monday approved a proposal for allotment of 16.8 million shares on a preferential basis to lndiabulls Housing Finance Ltd at Rs112 per share. The allotment, comprising 4.99 per cent of the bank’s equity, will be at 41 per cent premium to the existing share price of LVB, the bank stated.
Indiabulls will infuse Rs190 crore into LVB through this transaction and pump in another Rs200 crore through tier-I bonds, taking its total investment in LVB to Rs390 crore. LVB had already raised Rs460 crore through a QIP issue in March.
“The bank is adequately capitalised for the next few quarters. The preferential allotment signals the confidence of Indiabulls in LVB, and this can create a positive impact on the proposed merger,” said a senior banking official.
On April 5, LVB’s board approved the merger of the private sector lender with Indiabulls Housing Finance through a share swap deal. 
However, it is not clear how the bank is pursuing a merger with a housing finance company without authorisation from the Reserve Bank of India (RBI)
The RBI is expected to closely examine the fit-and-proper criteria of Indiabulls Group founder and chairman, Sameer Gehlaut, whose name appeared in the Panama Papers, before approving the proposal to merge the group’s housing finance arm with Lakshmi Vilas Bank (LVB).
The 2016, leaked documents from the Panama-based law firm Mossack Fonseca that showed a list of those who had allegedly opened shell firms in tax havens, included the names of 500 Indians. 
Indiabulls, a non-banking finance company, had applied for a universal bank licence when the RBI invited applications in 2013 but failed to secure one. 
Central bank sources said since the ‘fit and proper’ criterion was a key parameter for RBI to grant banking licence, the Panama Papers incident would be examined by the regulator before taking a call on the proposed merger.
“Promoter/promoting entity/promoter group should have a past record of sound financials, credentials, integrity and have a minimum 10 years of successful track record,” as per the RBI’s norms for on-tap licensing of universal banks.
Indiabulls, however, claims that Gehlaut’s investments abroad are all in full compliance with extant and current regulations.
Earlier this month RBI said it has learnt through media reports that Lakshmi Vilas Bank (LVB) and Indiabulls Housing Finance Limited (IBHFL) have made a merger announcement on 5 April 2019 with approval of their respective boards.
The central bank also made it clear that the presence of two nominee directors of the RBI on the board of LVB does not imply RBI’s indirect approval of the proposal.

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