INSUBCONTINENT EXCLUSIVE:
Shareholders of both Indiabulls Housing Finance (IBHF) and Lakshmi Vilas Bank (LVB) will gain in the short-term following the merger of
these two firms, according to analysts
For IBHF, it is an opportunity to transition to a banking platform and build a sustainable and scalable business model while for LVB, the
deal has valued its weak franchise at a huge premium, they said.
The proposed swap ratio is 14 shares of IBHF for every 100 shares of LVB, a
head-retail research at HDFC Securities
weak business at close to four times its adjusted book value
With capital to risk assets ratio (CRAR) of 7.7 per cent, of which common equity tier (CET) 1 is 5.6 per cent and gross and net
nonperforming assets or NPAs of 13.9 and 7.6 per cent, LVB is teetering on the edge of prompt corrective action and is in dire need of
capital even after the previous qualified institutional placement
access to lowcost deposit franchise, thereby ensuring longer term business growth, LVB shareholders can expect steady returns driven by
profitability with Rs 1.23 lakh crore of loans, gross and net NPAs of 3.5 and 2 per cent CRAR at 20.6 per cent , of which 14.4 per cent will
be CET1.
The deal is positive for IHF in the long term, but in the near to medium term transition to banking platform is likely to have
significant impact on the returns on equity
Hypercompetitive retail deposits market has increased the cost significantly for newer players, especially on growing distribution strength,
