Lakshmi Vilas Bank extends rally on merger with Indiabulls Housing Finance

Shares of Lakshmi Vilas Bank (LVB) were locked in the upper circuit for the third straight trading days after rising 5 per cent to Rs 97.35 on the BSE on Monday after the private sector lender announced merger with non-banking finance company Indiabulls Housing Finance (IHF).

The bank made the disclosure on Friday after market hours. The approval is subject to the Reserve Bank of India (RBI) and other regulatory & statutory approvals.

Till 09:52 am, a combined 2.48 million equity shares had changed hands and there were pending buy orders for 12.86 million shares on the BSE and NSE, the exchanges data shows.

In the past eight trading days, the stock has zoomed 54 per cent from Rs 63 on March 27, as compared to a 2 per cent rise in the S&P BSE Sensex.

According to the terms of the deal disclosed on Friday, the shareholders of the Chennai-based bank will get 0.14 share in Indiabulls for every share held in the lender [14 shares of IBH will be given for every 100 shares of LVB].

The bank believes that the merger of such two organisations will unlock value through its various synergies that exist exclusively but in unison, will create a large and healthy diverse retail asset book, high capital base for strong growth, huge opportunity to foray into newer businesses that may increase the risk fee income base of amalgamated entity such as wealth management, asset management and securities, tap into varied but experienced management and skilled personnel to develop a successful capital accretive model.

IHF said the amalgamated bank will derive operational efficiency from the adoption of technology-enabled processes pioneered by the company. It will aim to deliver more than 20 per cent RoEs through optimal utilisation of resources and synergies created.

Shares of IHF were trading flat at Rs 901 on the BSE, as compared to 0.08 per cent rise in S&P BSE Sensex at 10:09 am. In the past two weeks, the stock had outperformed the market by surging 26 per cent, against 3 per cent rise in the benchmark index till Friday.

Bombay Stock Exchange - BSE

National Stock Exchange of India Ltd (NSE)