Indiabulls shares plunge record 38% as regulatory pressures mount
Indiabulls Housing Finance Ltd.’s shares headed for a record plunge after the Reserve Bank of India placed curbs on a lender it plans to acquire, extending Friday’s slide sparked by a court probe into allegations of fraud.
The stock slumped as much as 38% and were trading 29% lower at 11:50 a.m. in Mumbai, headed for the biggest drop on record. The company’s $350m 6.375% notes due 2022 fell to their lowest level since issuance in May, according to prices compiled by Bloomberg.
India’s central bank placed lending restrictions on Lakshmi Vilas Bank Ltd., which was seeking a merger with Indiabulls, according to a filing on the weekend. Separately, the Delhi High Court Friday agreed to hear a petition to probe Indiabulls over allegations that it gave out “dubious loans.”
Indiabulls denies the allegations and its lawyer Mukul Rohatgi said the alleged loans were secured and most of them stand repaid. Indiabulls’ shares have been roughed up since the debt crisis at the IL&FS Group in September last year soured the sentiment for the entire financial sector.
“Until Indiabulls doesn’t come out of this murkiness, the merger will be at risk,” said Sanjiv Bhasin, executive vice president for markets and corporate affairs at Mumbai-based IIFL Securities Ltd. “We need more confidence from the management.”
Lakshmi Vilas shares dropped by the 5% limit for a second day, taking the year’s tumble to 60%, as the central bank cited high level of bad loans and insufficient capital as reasons for its restrictions.
“If asset quality at LVB is doubtful, and it’s not the kind of bank it was perceived to be, even if the merger goes through it would leave a sour taste,” Bhasin said.