Shares of Indiabulls Housing Finance Ltd fell as much as 17% on Friday after the company said it will acquire 40% stake in UK’s OakNorth Bank for $100 million. The announcement was made on Wednesday when equity markets were closed on account of Diwali.
This morning, fears of unrelated diversification sent the stock tumbling. In intra-day trade, the stock touched a low of Rs.592.30, a level last seen on 29 June.
In a notice to the exchanges, the company explained the acquisition by saying that it will help the company chart a roadmap to a deposit-taking franchise.
“Pursuant to all applicable regulatory approvals from relevant regulators in lndia and the UK… Indiabulls Housing Finance Ltd is investing $100 million for 39.76% stake in OakNorth Bank, a licensed UK commercial Bank… the company will be the largest shareholder in the bank,” Indiabulls Housing Finance said in a regulatory filing.
“Sameer Gehlaut, chairman of the company, will be investing in his persona| capacity up to 10% stake in OakNorth Bank at the same valuation,” the release added.
Indiabulls Housing Finance is currently engaged in the business of providing home loans. As of September 2015, the company had outstanding loan assets ofRs.58,225 crore. In September, the company raised nearly Rs.4,000 crore through a qualified institutional placement (QIP) issue.
OakNorth Bank is a digitally focussed bank which targets the small business segment in the UK. The bank was started by entreprenuer Rishi Khosla and others in 2013.
At 11.15am, Indiabulls Housing Finance was trading at Rs.593.35 on BSE, down 17.1% from its previous close, while India’s benchmark Sensex index fell 1.05% to 25,596.46 points.