Lakshmi Vilas Bank hits all-time low as RBI rejects merger with IBHFL

Shares of Lakshmi Vilas Bank (LVB) hit an all-time low and were locked in the lower circuit limit of 5 per cent at Rs 25.65 apiece on the BSE on Thursday after the Reserve Bank of India (RBI) on Wednesday rejected the proposed amalgamation of lndiabulls Housing Finance (IBHFL) with the bank.

The RBI said the application for the voluntary amalgamation of IBHFL and its subsidiary lndiabulls Commercial Credit with LVB could not be approved. CLICK TO READ FULL REPORT

The stock of the private sector lender has been hitting the lower circuit limit of 5 per cent since the past eight consecutive sessions, after the banking regulator initiated prompt corrective action (PCA) against the Chennai-based bank.

In the past three months, the stock has tanked 60 per cent, as compared to a 1.2 per cent decline in the S&P BSE Sensex. Today, it has fallen below its previous low of Rs 26.08 touched on March 4, 2019.

Till 09:35 am, a combined 37,189 equity shares changed hand on the NSE and BSE. There were pending sell orders for 3.2 million shares, representing 1 per cent of total equity of the bank, the exchange data shows.

Shares of Indiabulls Housing Finance, too, tumbled in the trade. At the time of writing of this report, the stock was trading at Rs 211.55, down nearly 12 per cent on the BSE.

Meanwhile, Brickwork Ratings (BWR) has downgraded the rating of long-term bonds of Rs 50.50 crore of LVB to BWR BB+ from BWR BBB-.

The rating downgrade necessarily factors in the classification of the bank under Prompt Corrective Action (PCA) framework by the regulator. The PCA is on account of high net non-performing assets (NPA), insufficient CRAR and CET-1 and negative RoA for two consecutive years, based on the on-site inspection under the Risk Based Supervision carried out for the year ended March 31, 2019.

“The limitations on the Bank as a result of PCA may likely restrict credit growth, though the Bank states of no restrictions on operations by depositors and lending activities to all segments except corporates and other stressed and high risk sectors,” BWR said in a rating rationale.