LVB’s board clears ₹500 cr rights issue
Lakshmi Vilas Bank (LVB) on Thursday said its board has approved raising up to ₹500 crore through a rights issue.
“The board at its meeting held today October 15, 2020 have considered and approved, inter-alia, subject to the necessary approvals, the raising of funds by issuance and allotment of equity shares or such other eligible securities of the Bank, for an aggregate amount of up to ₹500 crore by way of a rights issue…,” the private lender said in a regulatory filing.
Under a rights issue, the company allows only existing shareholders to participate in the fundraise.
Some of the large shareholders in Lakshmi Vilas Bank are India Opportunities Growth Fund Ltd-Pinewood Strategy (3.74%), Aviator Emerging Market Fund (2.49%), JM Financial Services Ltd (3.88%), Srei Infrastructure Finance Ltd (3.34%) and Indiabulls Housing Finance Ltd (4.99%), among others. LVB, which is in discussions with the Clix Group—a set of non-bank financiers—for a potential merger, needs to urgently raise capital to meet regulatory requirements.
Its capital adequacy ratio (CAR) as per Basel III guidelines contracted to 0.17 % as on 30 June, as against a regulatory minimum of 10.875%. The bank reported a net loss of ₹112.28 crore in the June quarter, compared to a year-earlier loss of ₹237.25 crore.
LVB, which has been under RBI’s prompt corrective action (PCA) since September 2019, said on October 8 that it has received an indicative nonbinding offer from Clix Group.
BANK IS IN TALKS WITH CLIX GROUP FOR A POTENTIAL MERGER
PCA entails curbs on highrisk lending, setting aside more money on provisions and restrictions on management salary.
Meanwhile, shareholders of the bank recently voted against the appointment of seven directors on its board, including S Sundar as the managing director and chief executive.
Shareholders also rejected the appointments of N Saiprasad, K R Pradeep and Raghuraj Gujjar as non -executive and non-independent directors, and BK Manjunath, Gorinka Jaganmohan Rao and YN Lakshminarayana Murthy as non-executive and independent directors.
These appointments were taken up for voting at the bank’s annual general meeting (AGM) on September 25.
“Many of these directors have rotated on-and-off. We believe that a part of the accountability for the bank’s deteriorating performance over the last few years rests with its slate of non-independent directors,” Institutional Investor Advisory Services said in a September 4 report.
The shareholders voted against these directors, basis the bank’s growing levels of NPAs and uncertainty related to going concern, an institutional investor told Mint earlier on condition of anonymity.
On Thursday, shares of the bank closed at ₹17.8 on the BSE, down 2.73% from its previous close.