Newest Indian Bank Plans $11.7 Billion Merger to Meet Rules
Added 01-08-19 01:04:02am EST - “Investors in Gruh Finance, controlled by Housing Development Finance Corp., India's biggest mortgage lender, will get 568 shares of Bandhan Bank for every 1,000 they own, according to exchange filings from the companies. The transaction…” - Finance.yahoo.com
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(Bloomberg) -- Bandhan Bank Ltd., India’s newest lender, will combine with mortgage financier Gruh Finance Ltd. in a $11.7 billion deal, bringing the bank closer to meeting shareholding rules and helping it accelerate expansion.
Investors in Gruh Finance, controlled by Housing Development Finance Corp., India’s biggest mortgage lender, will get 568 shares of Bandhan Bank for every 1,000 they own, according to exchange filings from the companies. The deal is valued at about 818 billion rupees ($11.7 billion), calculations based on closing share prices on Monday showed.
The transaction is meant to help Bandhan Bank founder and Chief Executive Officer Chandra Shekhar Ghosh comply with the Reserve Bank of India’s ownership rules, and will also allow the micro lender to expand into a new category of loans. India’s regulator has censured lenders for not meeting norms as the central bank tries to clean up an industry that’s been plagued by as much as $210 billion of stressed assets.
Shares of Gruh tumbled as much as 15 percent on Tuesday as the share-swap ratio was at a discount to its Monday closing price. Bandhan Bank slid as much as 5.5 percent before paring the declines, as the deal prompted investors to reassess the value of the lender, according to Bunty Chawla, an analyst at Batlivala & Karani Securities Pvt in Mumbai.
“With the swap ratio finalized, now the the price for Gruh will be completely dependent on the Bandhan Bank share price,” which looks overvalued given its price-to-book ratio, Chawla said. The bank is trading at more than six times the book value of its assets, data compiled by Bloomberg show.
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