Lakshmi Vilas Bank shares slip 5% on opening as shareholders reject re-appointment of directors

Shares of Lakshmi Vilas Bank started trading 5% lower on Monday morning as investors reacted to the ousting of the bank’s current management by the shareholders. Stocks were trading at Rs 18.10 per share, down from Rs 19.20 apiece. On Friday, Lakshmi Vilas Bank held its 93rd Annual General Meeting (AGM) where it sought shareholders approval for the re-appointment of seven of the bank’s directors, which were not approved by the shareholders. This included the Managing Director and CEO, S Sundar. Shares of the bank have slipped 45% in the last one year.

Shareholders also rejected the re-appointment of N Saiprasad, Gorinka Jaganmohan Rao, Raghuraj Gujja, KR Pradeep, BK Manjunath and YN Lakshminarayana Murthy along with S Sundar. Under the brewing uncertainty, with the management not being given an additional term, the Reserve Bank of India (RBI) stepped in over the weekend. The central bank approved that day-to-day affairs of the Bank will be run by a Committee of Directors (CoD) composed of three independent directors. In the interim period the three member committee will exercise the discretionary powers of MD & CEO, Lakshmi Vilas Bank said in a statement. 

Lakshmi Vilas Bank, did however, try to assuage investors and customers by highlighting that the bank’s Liquidity Coverage Ratio (LCR) of about 262%, is against the 100% required by the banking regulator. The Bank’s total Capital Adequacy Ratio (CAR) as per Basel Ill guidelines, was at 0.17% at the end of the April-June quarter. 

Additionally, shareholders approved the increasing of the Authorized Share Capital of the Bank from Rs 650 crore to Rs 1,000 crore. This will be divided into 100,00,00,000 equity shares of Rs. 10/- each, which is subject to RBl’s approval. In an effort to strengthen the Lakshmi Vilas Bank’s capital, the shareholders also approved the resolution authorizing the lender to undertake capital raising as FPO, Rights issue, QIP or other available routes to raise capital. The bank which was placed under RBI’s prompt corrective action in 2019, has trimmed its net loss to Rs 112 crore in the first quarter of this fiscal, down from Rs 237 crore in the year-ago period.