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Bandhan Bank to buy Gruh Finance in share-swap deal


(Reuters) - India's Ltd will buy mortgage provider in a share-swap deal to build up its housing loan portfolio, the companies said on Monday.

The deal will also help Bank's main shareholder, Financial Holdings Ltd, reduce its stake in the lender to just above 60 percent, reported earlier in the day.

Shares in both companies fell sharply on a media report of the deal on Monday before it was officially announced. One said diluting Bandhan Financial's stake was probably the main motive and the deal lacked potential to boost shareholder value given Bandhan and Gruh's similar portfolios.

Bandhan has a market capitalisation of 598 billion rupees ($8.6 billion), while Gruh Finance is worth 232.24 billion rupees.

Last year, the of (RBI) withdrew permission for to open new branches and froze its chief executive's salary for failing to bring down Holdings' stake to below 40 percent.

began operations in 2015 and Indian banks are required by law to reduce a major shareholder's stake to less than 40 percent within three years of starting operations.

Under the deal announced on Monday, shareholders of Gruh Finance, majority owned by Housing Development Finance Corp, will receive 568 shares of for every 1,000 shares held.

Shares of Bandhan Bank closed down 5.8 percent at 498.05 rupees on Monday, on of a deal, which was announced after the market close. Gruh Finance shares ended 4.1 percent lower at 306.35 rupees.

has tightened its grip on the sector amid fears that problems at two large non-financial companies could signal a wider credit crunch.

($1 = 69.6150 Indian rupees)

(Reporting by Chris Thomas and Arnab Paul in Bengaluru; Editing by Subhranshu Sahu and Susan Fenton)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Tue, January 08 2019. 11:22 IST