October 1, 2019 / 7:51 AM / 19 days ago

Indiabulls hits over 5-year low, rattled by merger concerns and probe

BENGALURU, Oct 1 (Reuters) - Indiabulls Housing Finance Ltd’s shares extended their slide on Tuesday and hit a more than five-year low, as remarks from the mortgage lender following a tide of negative news failed to assuage investors.

This comes as the company stares at a potential fall-through in its merger with Lakshmi Vilas Bank Ltd, analysts said.

Private-sector lender Lakshmi Vilas Bank is the latest to face struggles in an already troubled banking sector, with the central bank taking regulatory action last week for high level of bad loans and lack of sufficient capital to manage risks, among others.

Indian police have also started probing Lakshmi Vilas Bank’s directors for alleged misappropriation of funds.

Indiabulls Managing Director Gagan Banga on Monday tried to assuage investors, saying the Reserve Bank of India’s action on Lakshmi Vilas Bank “does not shut the door on the merger”.

Shares in Indiabulls, which traded at 1,440 rupees at their peak in January last year, gave up early gains on Tuesday to fall as much as 11.8% to 225.65 rupees, their lowest since March 2014.

The stock logged its worst ever daily loss on Monday with a 34% drop, and has lost over 70% this year as of last close.

An Indian court has also ordered a probe into Indiabulls on allegations of illegalities, violations and siphoning committed by its promoters, subsidiaries and their promoters, reports said. Indiabulls has denied the allegations.

“If the company (Indiabulls) continues to face headwinds from negative sentiment, it may potentially face challenges raising fresh funds,” Macquarie Research said in a note.

The banking industry, which is going through a tumultuous time plagued by issues including high levels of bad loans, took a big hit last year after a major infrastructure conglomerate collapsed, straining liquidity in the sector. (Reporting by Chris Thomas in Bengaluru; Editing by Subhranshu Sahu)

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