Indiabulls joins UWB bidding battle
Indiabulls Financial Services (IBFSL), one of the country’s fastest-growing financial service companies, has submitted a proposal to merge the much sought-after United Western Bank with itself in an attempt to create a large pan-India banking orga...
By TNN |
MUMBAI: Indiabulls Financial Services (IBFSL), one of the country’s fastest-growing financial service companies, has submitted a proposal to merge the much sought-after United Western Bank with itself in an attempt to create a large pan-India banking organisation.
The firm, promoted by three Delhi IIT engineers in ’00 for Rs 1.5 crore, has proposed to offer UWB shareholders one share of Indiabulls for every six they own in their company. This values UWB at Rs 275-300 crore.
The plan was approved by the Indiabulls board on Thursday and the proposal has already been submitted to the Reserve Bank of India. The firm proposes to do the merger of UWB after its real estate business is spun off into a separate company. Final shareholder approval for the spin-off is expected later this month. This will leave IBFSL with only the financial service business.
If the merger with UWB is approved by the RBI, Indiabulls proposes to increase the paid-up equity of the combined entity by Rs 450 crore. Indiabulls is a non-banking financial service company. The RBI has set certain terms and conditions for the merger of an NBFC with a bank in May ’05, but has not cleared any proposal so far on this.
Several banks, including ICICI, India’s second-largest bank, HDFC Bank, IDBI Bank, Canara Bank, want to take over the failed Maharashtra bank. The Maharashtra government is also interested and has sounded out HDFC for a joint bid. The RBI is likely to take a decision soon on the suitor.
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Indiabulls is believed to have told the RBI that its proposal will immensely benefit UWB shareholders, create a large bank with country-wide presence, strong capital base, proven track record of profitability and growth and sound management. It will be able to offer its over 4.35 lakh customers access to banking products and in turn provide securities-related services to UWB’s customers.Indiabulls derives a bulk of its income from the securities business such as equity and derivatives brokerage, loans against shares and IPO financing and the consumer finance such as unsecured loans, personal loans and home loans.The firm is now in the process of demerging its real estate business into a separate company.
After the spin-off, the net worth of Indiabulls will drop to Rs 1,000 crore from about Rs 2,400 crore. If RBI okays the merger, Indiabulls proposed funds infusion will take its combined networth to close to Rs 1,500 crore and make it one of the biggest private sector banks in terms of net worth.
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