Shares in Indiabulls Housing Finance have dropped 17% after the non-bank home loans group splashed £66 million on a 40% stake in UK challenger bank OakNorth.
Investors took a dim view of the deal, which the Indian group believes will give it a presence on the international stage and help in its ambition to acquire a domestic deposit-taking license.
One of a host of new entrants to the UK banking market, OakNorth bills itself as a bank for entrepreneurs, providing loans to small firms, and accepting deposits online.
The bank, which obtained its license in March 2015, has a current loan book of £25-£30 million and a deposit base of £10-£15 million.
It recently struck a deal with Mambu to provide its core technology backbone through an SaaS platform
Rishi Khosla, CEO and co-founder of OakNorth Bank, says: “This is a massive vote of confidence in OakNorth, and this major investment will enable us to accelerate and expand our ambitious growth plans to take on the major banks’ ‘computer says no’ approach to small business lending."
Indiabulls investors were nonplussed by the logic behind the deal, with Nomura describing the £66 million outlay on a young startup bank as a risky proposition.