LVB-Indiabulls Housing Fin merger has no RBI sanction
08 April 2019
Reserve Bank of India (RBI) has clarified that the reported merger of Lakshmi Vilas Bank (LVB) and Indiabulls Housing Finance Limited (IBHFL) does not have any approval of the central bank and that the presence of additional directors nominated by the RBI on the board of LVB does not imply any approval of the RBI of the merger proposal.
Moreover, RBI said, the additional directors have clearly mentioned at the meeting that they have no view on the proposal.
RBI said the proposals, as and when received from these entities, will be examined in RBI as per extant regulatory guidelines/directions.
RBI comments, issued late on Saturday, come after the board of Lakshmi Vilas Bank (LVB) on Friday approved the merger of the private sector lender with Indiabulls Housing Finance (IBH) through a share swap deal.
"It is clarified that the merger announcement does not have any approval of RBI at this stage. It is also clarified that presence of additional directors nominated by the RBI on the board of LVB does not imply any approval of the RBI of the merger proposal," the central bank stated in a late evening release.
Some reports, meanwhile, also claimed that the presence of two nominee directors of the RBI on the board of LVB implies RBI’s indirect approval of the proposal.
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, LVB 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.
The amalgamation comes at a time when housing finance companies are facing liquidity issues and a slowdown in loan disbursements after the IL&FS debacle.
The merged entity will have a net worth Rs19,472 crore and a loan book of Rs1,23,393 crore for the nine months of FY19. Its employee strength will stand at over 14,300.
The shareholders of IBH will own 90.5 per cent of the amalgamated entity, while those of LVB will hold the balance 9.5 per cent. Indiabulls founder and chairman, Sameer Gehlaut’s stake will come down from 21.5 per cent to 19.5 per cent. He will further bring his holding down to below 15 per cent before the merger is effective.
IBH’s board has also constituted a reorganisation committee headed by independent director and former RBI Deputy Governor SS Mundra.
Bank employees represented by the All India Bank Employees' Association (AIBEA) have, meanwhile, urged RBI governor Shakthikanta Das to not allow the proposed merger of Lakshmi Vilas Bank with Indiabulls Housing Finance Ltd (IHFL).
The central bank should instead merge LVB with one of the public sector banks, AIBEA general secretary CH Venkatachalam said in a letter to the RBI governor.
“Taking into account the fragile health of LVB, it is necessary for RBI to take a holistic view and merge it with one of the public sector banks in public interest, instead of allowing LVB to merge with IBH,” Venkatachalam said.