Lakshmi Vilas Bank Climbs 10% After CCI Clears Merger With Indiabulls Housing

Lakshmi Vilas Bank shares hit the 10% upper circuit limit on Friday after the Competition Commission approved the bank’s merger with Indiabulls Housing Finance. At 2.32pm, shares of Lakshmi Vilas Bank were trading at Rs 63.55, up 10%, while those of Indiabulls Housing Finance were up 1.3% to Rs 114.25 apiece.

“CCI at its meeting held on 20 June 2019 considered the proposed combination and approved the same,” Indiabulls Housing Finance said in a notification to stock exchanges.

Last month, Indiabulls Housing Finance had informed about the change in the merger scheme, saying that the company and its subsidiary Indiabulls Commercial Credit Ltd (ICC), will now be merged into Lakshmi Vilas Bank. Earlier, it was the other way round, as Lakshmi Vilas Bank was supposed to merge into Indiabulls Housing Finance.

According to a report, the change in the merger agreement was to prevent transfer of the bank licence from Lakshmi Vilas Bank to Indiabulls Housing Finance since the Reserve Bank of India (RBI) typically does not easily permit a transfer of licence.

The promoters of Indiabulls Housing Finance, however, would still need clearance from RBI to hold more than 10% in the bank.

Now, under the new agreement, shareholders of Indiabulls Housing Finance will get 7.143 shares of Lakshmi Vilas Bank for each share they hold in Indiabulls Housing. Consequently, Indiabulls Housing Finance will hold 90.5% of the equity capital of the merged entity, while shareholders of Lakshmi Vilas Bank will hold around 9.5%.

Lakshmi Vilas Bank had announced its deal with Indiabulls Housing Finance in April this year with an intent to create a combined entity with larger capital base and wider geographical reach.