Indiabulls promoters ready to exit real estate business for bank merger

With the Chennai-based Lakshmi Vilas Bank set to merge with Indiabulls Housing Finance in a share-swap deal, Indiabulls group promoters are ready to exit the real estate business in case the Reserve Bank of India (RBI) is not comfortable with a bank owner having realty business under wings.

Ashwini Kumar Hooda, deputy managing director, Indiabulls said, "It (real estate) is less than 10 per cent of business and financial services form 88 per cent of assets for the group. The promoter (Sameer Gehalut) wants to be largely in financial services and is ok to exit real estate business."

The boards of both the entities approved the merger proposal early this month and have sent the proposal to RBI for scrutiny and approval.

Under the proposed scheme, shareholders of Lakshmi Vilas Bank (LVB) will get 14 shares of Indiabulls Housing Finance (IBHF) for every 100 equity shares held in the bank.

Hooda asserted that Indiabulls Finance qualifies for bank merger without existing from realty business. He pointed out that while the RBI policy says that financial services business should be at least 60 per cent of a group business, in case of IndiaBulls, the financial services business made up 86 per cent. Hence, he said, the company was well within regulations to qualify for the bank merger.

The entity has all the liquidity on balance sheet for meeting Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) requirements. “We are not looking for any kind of wavier from RBI for merger process. There is enough capital on the balance sheet”, he said.

After the merger the capital adequacy ratio would be 20 per cent. The company also has a track record for 10 years and meets all requirements of “fit and Proper” norms of banking regulator, he added.

The company posted a net profit of Rs 1,006 crore in the fourth quarter ended March 2019 with net interest income of Rs 1,591 crore.