Baring PE Asia in talks to buy 26% in Lakshmi Vilas Bank

MUMBAI: Baring Private Equity (BPE) Asia is in talks with Lakshmi Vilas Bank to buy at least a 26% stake in the Chennaibased private lender, said two people close to the development.

Lakshmi Vilas is keen to sell as much as 51% if permitted by the Reserve Bank of India (RBI) but bad loans may cloud a potential deal as Baring wants to value the lender at about $400 million, a far cry from Lakshmi Vilas’s expectation of $1 billion, said the two people, who did not want to be named.

“The bank has been in talks with both BPE Asia and another strategic firm. The bank is hoping to seal the deal in the next six months,” said the first person.

LAKSHMI VILAS PLANS TO USE FRESH FUNDS TO BOOST ITS CAPITAL ADEQUACY WHICH HAS BEEN FALLING

The person said the vast disparity in Lakshmi Vilas’s valuation is because “non-performing assets of the bank have risen considerably in the last one year and there will be a requirement to make additional provisions in future as well”.

The person did not provide details of the strategic firm which is also separately in talks with Lakshmi Vilas.

Lakshmi Vilas’s gross nonperforming assets (NPAs) widened sharply to 10.73% as of end- June 2018, from 3.78% as of endJune 2017.

For the first quarter of fiscal year 2018, the bank swung to a loss of ₹124 crore from a profit of ₹66 crore a year earlier. Gross advances stood at ₹26,127 crore last quarter.

A spokesperson for BPE Asia declined to comment.

“It may be indicated that the bank is in discussions with prospective investors. All details have been reported to the stock exchanges,” a spokesperson for Lakshmi Vilas said in response to an emailed query.

Lakshmi Vilas plans to use the fresh funds to boost its capital adequacy which has been falling, said the first person. As on 30 June, its capital adequacy stood at 9.45% as against 9.81% a quarter ago.