MUMBAI: Lakshmi Vilas Bank’s (LVB) plan to merge with Indiabulls Housing Finance has come crashing down with the Reserve Bank of India (RBI) refusing approval. LVB, in a regulatory filing with stock exchanges late on Wednesday, said the RBI hasn’t approved of the voluntary amalgamation of Indiabulls Housing Finance and Indiabulls Commercial credit with LVB.
With this, months of speculation over the fate of the merger is sealed. In fact, the succession of events had already cast a doubt on the regulator’s nod to the merger. Just 12 days ago, RBI put LVB under Prompt Corrective Action (PCA) for its high non-performing assets and insufficient capital. RBI had earlier nominated additional directors to the board of LVB. In August, LVB’s CEO Parthasarathi Mukherjee had quit, citing personal reasons.
LVB said RBI approval was sought on May 7, after both the entities decided to merge early in April. Indiabulls, having realised that RBI nod would be difficult to come by for the entity with interests in real estate, had even sought to exit the realty business. The two firms had nominated two directors each for the merged entity: Indiabulls nominated chairman Sameer Gehlaut and vice-chairman Gagan Banga and LVB recommended K R Pradeep from its promoter group and Mukherjee, before he quit.
Indiabulls Housing Finance had also came under scrutiny after a PIL in Delhi High Court sought probe against it by various State agencies. The court had sent notices to RBI, Securities and Exchange Board of India and others on the petition by The Citizens Whistle Blowers’ Forum.
The merger was seen as a measure to bring in the much-needed capital for LVB and giving Indiabulls the reach a bank would bring for the mortgage lender. LVB had recently got shareholder approval for raising up to Rs 1,000 crore by issuance of securities, including American Depository Receipt and Global Depository Receipt.