MUMBAI: Indiabulls Housing Finance ( IBHFL ), one of the fastest growing mortgage loan companies in India, on Friday said it will merge south-based Lakshmi Vilas Bank (LVB) with itself through a share-swap deal. This will form a bank with assets of nearly Rs 1.25 lakh crore and a market capitalisation of over Rs 41,000 crore. The boards of the two entities met on Friday evening and approved a shareswap ratio under which, for every 100 shares of LVB , shareholders will get 14 shares of the merged entity.The next step for the merger to complete is the approval of the shareholders of the two entities by 2/3rds majority. After that, both will need to obtain approvals from RBI , Competition Commission of India , Sebi and the bourses. The proposal will then need an approval from NCLT and then a final nod from the central bank.The proposed new entity will be named Indiabulls Lakshmi Vilas Bank with Sameer Gehlaut, the current chairman of IBHFL, taking over as its vice-chairman. Gagan Banga, currently VC & MD of the housing finance company, and Parthasarathi Mukherjee, current MD of the bank, will become the joint MDs. The merged entity will have a net worth of nearly Rs 19,500 crore (as of December 2018), disclosures on the exchanges by IBHFL showed. A chairman has not yet been named for the merged entity.Once complete, the IBHFL-LVB merger will be the fourth such deal between a bank and an NBFC in the last 18 months. In October 2017, IndusInd Bank had announced it would be merge Bharat Financial Inclusion with itself. In January 2018, IDFC Bank and Capital First announced a merger, while in January this year Bandhan Bank announced merger of Gruh Finance with itself.IBHFL has put in place a reorganisation committee headed by S S Mundra, a former RBI deputy governor and current independent director on the board of the mortgage lender, to undertake necessary decisions in relation to the proposed merger, the communication to the exchanges said.The merged company will have a stronger reach as IBHF, established 20 years ago, has a strong presence in the northern and western parts of India, while LVB, set up 95 years ago, has a strong foothold in the southern part. As of December 2019, LVB had 569 branches while IBHFL had 250 branches. As a bank, IBHFL will have access to cheaper funds through CASA (current account-savings account), while LVB will have a pan-India presence.In the merged entity, current shareholders of IBHFL will own 90.5% while the shareholders of LVB will hold the balance 9.5%. IBHFL founder Gehlaut’s stake, currently at 21.5%, will come down to 19.5% after the merger. “Gehlaut has submitted that he will further bring this down to below 15% of the amalgamated entity before the merger is effective,” the mortgage lender said. Currently, the RBI allows an individual entity to hold up to 15% in any bank in India.Earlier this week, IBHFL had said it was planning to raise up to Rs 26,000 crore during the current fiscal, in addition to the Rs 27,512 crore of cash and cash-equivalent currently available with it. The high amount of liquidity maintained by IBHFL will easily meet SLR and CRR requirements of the combined entity immediately on completion of the merger, the IBHFL management said in a post-announcement conference call with analysts.