Indiabulls stocks lose 8% in two sessions

Last Updated: Wed, Apr 10, 2019 11:12 hrs
Real Estate

Mumbai: India Bulls Housing Finance (IBHF) finished as the top loser among the Nifty50 stocks for the second consecutive day on Tuesday.

The housing finance company fell out of favour among investors owing to regulatory uncertainty post its merger announcement with Lakshmi Vilas Bank (LVB) on Friday.

Analysts said the counter could remain under pressure in the near term.

"While IBHFL stock came under pressure due to swap ratio that was thought to be unfavourable to its shareholders, the wide difference in the prices could mean LVB could rise more, currently under 5 per cent circuit limit...," said Deepak Jasani of HDFC Securities

"However, later the discount of the merging company (LVB) would sustain -- more so because of regulatory uncertainties."

He added that the approval of three deals over the last few years by the Reserve Bank of India (RBI) is encouraging. The move appears to be positive for regional banks as other non-banking financial companies (NBFCs) may see merger and acquisitions (M&A) opportunities in them.

Edelweiss Research in a note also said that critical question is whether the deal measures up to regulatory rigour the RBI is known for. While the deal makes the compliance cut off and is within the purview of the policy framework, similar transactions in the past indicate an element of subjectivity in handing out banking licences by the RBI.

"Thus, uncertainties do exist for the IHFL-LVB merger, but at the same time, approval of three deals by the RBI is encouraging."

Regulatory uncertainty arose after the central bank clarified that the merger announcement "does not have any approval of the RBI at this stage" and also that the presence of Additional Directors nominated by the RBI on the Board of LVB does not imply any approval of the RBI of the merger proposal.