The bank had said on September 15 the mutual due diligence with Clix Capital was substantially complete and that the parties were in discussions on the next steps.
The board of Lakshmi Vilas Bank (LVB) on Thursday approved raising Rs 500 crore through a rights issue. The cash-starved lender has been pursuing a merger with Clix Group from whom it has received an indicative non-binding offer. In the meantime, LVB is exploring other options to raise funds. The bank had a capital adequacy ratio of just 1.12% as on March 31 against the Reserve Bank of India (RBI) requirement of 8%, and the tier I and II components of CAR stood at a negative 0.88% and 2%, respectively.
The lender is being run by a three-member committee of directors (CoD) after shareholders rejected the reappointment of seven directors, including that of the MD & CEO S Sundar, at the recent annual general meeting (AGM).
Sources in the know told FE that a brokerage firm deputed by the board had approached existing shareholders and investors informally before the final call on the rights issue was taken. A lot of them have agreed to put in money and so the bank proceeded with the idea of rights issue, the sources said. The share ratio and the price have to be fixed by the board or a committee under the board, they said.
Regarding reports that a section of shareholders are against the deal with Clix, sources said the CoD has not had any talks with shareholders on this matter. “There is some progress on the deal with the Clix Group and negotiations on valuation and other related matters are on,” the sources said.
The bank had said on September 15 the mutual due diligence with Clix Capital was substantially complete and that the parties were in discussions on the next steps.
Last week CARE Ratings downgraded a slew of LVB’s unsecured redeemable non-convertible subordinated lower tier-II bonds already issued by the bank and additional tier-I bonds that are yet to be issued by the troubled private sector lender. The majority of the bond ratings have been revised down to CARE BB- negative (double BB minus, outlook negative) from CARE BB+ negative (double B plus, outlook negative).
LVB, which had been placed under RBI’s prompt corrective action since 2019, had narrowed its net loss to Rs 112.28 crore for Q1FY21 from a net loss of Rs 237.25 crore in Q1FY20. Gross NPAs rose to 25.40% from 17.30% in Q1FY20, while the net NPAs increased to 9.64% from 8.30%.
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