New Delhi: Sameer Gehlaut, the founder of Indiabulls Housing Finance Limited, is all set to step down from the company’s board of directors by the fiscal end. This move comes alongside Gehlaut’s decision to sell half of the stake held by him and his firms in the housing finance company.
As per an exchange filing, Gehlaut has sold half of his stake in the company amounting to 11.9% to several funds which include the likes of Blackstone Group Inc. and Abu Dhabi Investment Authority.
According to Bloomberg Quint, the deal is priced at $184 million, a valuation based on Indiabulls Housing’s market value. Reportedly, Blackstone purchased a 2.27% stake whereas Abu Dhabi Investment Authority bought a 1.25% stake.
In an email addressed to the board of directors, Gehlaut said that he will be completing the process of “de-promoterisation of the company” with requisite approvals in order for the company to be “fully professionally managed”.
After selling half of his stake in the company, Gehlaut will continue to hold a 9.8% stake in Indiabulls Housing. He, as per his email, intends to “hold these shares and participate in the future growth of the company”.
This is quite the welcome exit for Gehlaut who has been in the eye of controversy for the last few years. The collapse of the IL&FS group in 2018 snowballed into a protracted credit market crunch that resulted in defaults by over five NBFCs. The crisis which engulfed the sector triggered troubles for Indiabulls Housing as well.
In September 2019, a PIL was filed in the Delhi high court by the Citizens Whistle Blowers Forum seeking a probe into the business dealings of Indiabulls Housing. The PIL alleged that Indiabulls Housing, its promoters and various group companies advanced “dubious loans” to companies owned by some of India Inc’s largest corporate houses. These corporate groups in turn allegedly routed the money “back to the accounts of companies owned by the promoters of Indiabulls so as to increase their personal wealth”.
The PIL identified five corporate houses that allegedly received huge loans from Indiabulls which then invested that money back into the housing finance company.
The whistle blower forum, whose members include former Delhi high court Chief Justice A.P. Shah and advocate-activist Prashant Bhushan, pleaded for a probe while accusing the concerned authorities of inaction.
Indiabulls Housing responded by saying that the petitioners had played into the hands of “blackmailers and corporate rivals” at a critical time when the merger between the company and Laxmi Vilas Bank was in process.
In April 2019, the board of Laxmi Vilas Bank had approved its merger with Indiabulls Housing through a share swap deal. Indiabulls Housing was hoping that the merger would give it access to low-cost stable funds. At the same time, Laxmi Vilas Bank, which is essentially Tamil Nadu-based, was hoping that the merger would enable it to gain a larger geographical presence. The bank had sought approval from the RBI for the merger in May 2019.
With the merger of GRUH Finance with Bandhan Bank, Capital First with IDFC Bank and Bharat Financial Inclusion with IndusInd Bank in the recent past, market observers were expecting the LVB-Indiabulls merger to pass the RBI muster.
However, a little over a month after the PIL was filed, the Reserve Bank of India – whose approval was awaited for the merger of the two companies – refused to give the go-ahead to the proposed arrangement.
Market experts suggested that the central bank’s decision to withhold approval possibly stemmed from the discomfort with the promoter group.
This left Laxmi Vilas Bank in dire straits whose finances, then, were in a pretty shoddy state. For the financial year 2018-19, the bank’s net NPA (non-performing assets) stood at 7.49%. The capital adequacy ratio was at 7.72% and its return on assets was (-) 2.32%. It had reported a net loss of Rs 894.10 crore for 2018-19. (In November 2020, Laxmi Vilas Bank merged with Singapore-based DBS Group Holdings after receiving an approval from the RBI.)
Subsequently, in early March 2020, news broke out that the Reserve Bank of India had given a clean chit to Indiabulls Housing as far as its money lending activities were concerned. Markets greeted this news with much gusto and boosted the share by nearly 15% on March 2. This, however, was a case of misreporting, according to the online news portal Newsclick.
An article published on the portal claims that the RBI did not dole out a clean chit to the beleaguered company. The article states that the RBI in its affidavit before the Delhi high court pleaded that the whole matter pertained to a time when housing finance companies were monitored and supervised by the National Housing Bank (NHB) and that the central bank had “very limited information” concerning the “supervisiory aspects” mentioned in the PIL.
“The affidavit makes it clear that many of the allegations could not have been investigated by the central bank since the information was not available with the institution but to suggest that the RBI gave a “clean chit” to Indiabulls is highly misleading. On the contrary, many of the observations and allegations made in the writ petition have been found to be true by the Reserve Bank of India,” the article states.
Earlier this month, the company was in news for its public issue of bonds via which the company can raise up to Rs 1,000 crore. The bond issue opened on December 9 and will close on December 20.