Indiabulls buys 39.76% stake in OakNorth Bank
Mumbai-based Indiabulls Group has bought a 39.76% stake in UK-based OakNorth Bank, a lender to small businesses and enterprises. The deal was valued at £66 million and boosted OakNorth's capital base to over £85 million. "This is a massive vote of confidence in OakNorth, and this major investment will enable us to accelerate and expand our ambitious growth plans," said OakNorth co-founder Rishi Khosla.
The Indiabulls Group
Indiabulls Group is an Indian conglomerate founded by Sameer Gehlaut in 1999. It went public in 2005, and operates in sectors like housing finance, real estate and wealth management. As of 2015, Indiabulls Group had 7000 employees, and a net worth of over Rs.19,000 crore. Headquartered in Gurgaon, Indiabulls is one of the top dividend paying groups amongst the Indian listed promoter owned group/companies.
Indiabulls Housing Finance-growing at a fast pace
Indiabulls Housing Finance has seen its assets under management (AUM) grow by 38% over the past five years, making it India's third largest housing finance company.
Indiabulls stock plummets on UK bank deal
After Indiabulls announced its planned acquisition of 39.76% stake in OakNorth, its shares crashed. Its stock dived 17.46% intra-day to Rs.590.60 on the Bombay Stock Exchange. At the National Stock Exchange, Indiabulls shares fell 18.52% intra-day to Rs.584. At the end of the day, Indiabulls' shares closed, down by 10.02% on the BSE at Rs.643.85, and down by 10.22% on the NSE at Rs.643.50.
The timing of the acquisition
Indiabulls' acquisition of 39.76% stake in OakNorth Bank comes just after Prime Minister Narendra Modi's visit to the United Kingdom which is supposed to bring $14 billion worth of business deals.
Analysts' opinions about the deal
OakNorth obtained its licence in March 2015 and has a small loan book of £25-30 million and a small deposit base of £10-15 million. In that light, analysts believe Indiabulls' £66 million acquisition is extravagant. Neither do they believe that the acquisition will make it easier for Indiabulls Housing Finance to get the RBI's approval to become a deposit-taking non-banking financial company (NBFC).
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