Uncertainty clouds Indiabulls-Lakshmi Vilas Bank merger

The Reserve Bank of India has placed LVB under its prompt corrective action framework, which means it is restricted from opening new branches and paying dividends, it has to reduce its concentration of loans in some sectors and lower its lending to corporates

Salil Panchal
Published: Oct 9, 2019 09:44:15 AM IST

Life is not a template and neither is mine. Like several who have worked as journalists, I am a generalist in my over two decade experience across print, global news wires and dotcom firms. But there has been one underlying theme in each phase; life gave me the chance to observe and tell a story -- from early days tracking a securities scam to terror attacks and some of India's most significant court trials. Besides writing, I have jumped fences to become an entrepreneur, as an investment advisor -- and also taught the finer aspects of business journalism to young minds. At Forbes India, I also keep an eye on some of its proprietary specials like the Rich list, GenNext and Celebrity lists. An alumnus of Xavier Institute of Communications and H.R College of Commerce and Economics in Mumbai, I have worked for organisations such as Agence France-Presse, Business Standard, The Financial Express and The Times of India prior to this.

g_122065_lakshmi_vilas_bank_280x210.jpgImage: Rahul Mahadik for Forbes India

In the season of mergers, the proposed merger of Lakshmi Vilas Bank (LVB) with Indiabulls Housing Finance (IHF) was one of the earliest to be announced. And now it is among the most uncertain. The Reserve Bank of India has placed LVB under its prompt corrective action (PCA) framework, which means it is restricted from opening new branches and paying dividends, it has to reduce its concentration of loans in some sectors and lower its lending to corporates.

LVB has seen a drop in total income, growth in its loan book, negative return on assets for two successive years, a rise in NPAs, and lower capital levels. It indicated that the amalgamated entity will have a larger loan book and higher capital adequacy ratio. A loss-making LVB will take a long time to pull itself out of the PCA. 

IHF itself has seen a fall in consolidated profits, net interest income and deteriorating asset quality in Q1FY20. Its stock fell to a five-and-a-half year low of ₹282 levels currently, after rating agency Care lowered its long-term rating for the housing finance company last month.

(This story appears in the 25 October, 2019 issue of Forbes India. You can buy our tablet version from Magzter.com. To visit our Archives, click here.)

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