Lakshmi Vilas, Indiabulls Housing merge to expand footprint

Indian private-sector lender Lakshmi Vilas Bank Ltd will merge operations with housing finance firm Indiabulls Housing Finance Ltd in a share-swap deal, the companies said in a filing on Friday. Shareholders of the Chennai-based bank will get 0.14 share in Indiabulls for every share held in the lender, the companies said. The merger will create a large, healthy and diverse asset book, Lakshmi Vilas Bank said. It will also allow the merged company to collectively foray into newer businesses that help increase fee income, the lender added.

The joint company will have a net worth of 194.72 billion rupees ($2.81 billion), as of Dec-end 2018, the housing finance firm said, adding that the merger will lead to a stronger reach as Indiabulls` exposure in the northern and western parts of the country will combine with Lakshmi Vilas` foothold in southern India.

"It is a win-win deal for both the companies," said AK Prabhakar, head of research, IDBI Capital in Mumbai. Lakshmi Vilas Bank had total assets worth 404.29 billion rupees, as of March 31, 2018, while Indiabulls Housing had total assets of 1.32 trillion rupees, as on December 31.

"Indiabulls will get a banking tag, which will bring down its cost of funds, so it is a bigger win for them. The merger will give good branding and better pan-India presence for the Tamil Nadu-based Lakshmi Vilas," Prabhakar added.

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Post the merger, Indiabulls founder and Chairman Sameer Gehlaut will be the vice-chairman. Meanwhile, Parthasarathi Mukherjee, managing director and CEO, Lakshmi Vilas Bank, and Gagan Banga, Indiabulls` vice-chairman and managing director, will be appointed as joint MDs, Indiabulls said.

Indiabulls said it has formed a panel, headed by Independent Director SS Mundra to oversee the proposed merger. The announcement was made after market hours. Shares of Lakshmi Vilas closed 4.98 percent firmer on the NSE index on Friday, while Indiabulls Housing ended 0.6 percent higher.