Two days after the Reserve Bank of India (RBI) rejected the proposed merger between Lakshmi Vilas Bank (LVB) and Indiabulls Housing Finance, the latter's shares have come tumbling down on Friday, according to latest stock reports. The shares of Indiabulls Housing Finance fell over 9% on Friday, as per reports. Reports add that since the rejected merger, the company's shares have dropped by 26%. RBI had not revealed the reason behind their rejection.
Indiabulls Housing Finance which is a non-banking financial company (NBFC) reached its 52-week low of Rs 176.60 per share on the Bombay Stock Exchange (BSE), as per reports. Meanwhile, LVB too witnessed a fall in its shares by 5% for the second day in a row. LVB shares reportedly maintained at Rs 24.40 per share on BSE. On May 7, LVB had sought a merger with Indiabulls Housing Finance and had received all necessary approvals, except the central bank's nod.
Earlier on Wednesday, the RBI rejected the proposed merger between Lakshmi Vilas Bank and Indiabulls Housing Finance, according to PTI. This rejection came a month after the RBI initiated Prompt Corrective Action (PCA) against LVB. The central bank had initiated this action reportedly due to the bank's high non-performing assets (NPAs), insufficient capital adequacy levels, negative Return on Assets and high leverage. The companies had initially announced their merger in April 2018.
Apart from RBI action, the bank is also facing Delhi Police's Economic Offences Wing complaint against its board alleging cheating and misappropriation of funds. Several members are booked along with former Religare promoters Malvinder and Shivinder Singh alleging misappropriation of Religare Finvest Ltd’s (RFL) fixed deposits held in LVB. While Ranbaxy's former promoter Shivinder Singh has been arrested along ex-CMD of Religare Enterprises Ltd (REL) Sunil Godhwani along with two others, police have issued a look-out notice against former Ranbaxy promoter Malvinder Singh. The police have been granted 4-day judicial custody of the accused.
Reports state that the merger had been in doubt due to regulatory action against LVB. Meanwhile, Indiabulls Housing Finance has reportedly said the board would consider a share buyback proposal on October 14. Reports also add that the Ministry of Corporate Affairs has been investigating three Indiabulls Group companies for about a year and will submit its final report by the end of October. Experts state that both parties were questionable with respect to fulfilling the criteria for a merger, hence the central bank's decision was just.