Lakshmi Vilas Bank (LVB) on Monday said it has received a preliminary non-binding letter of intent (LoI) for an investment from Clix Capital Services and Clix Finance India. This is the embattled lender’s second public attempt at raising capital after the Reserve Bank of India (RBI) turned down a proposal for its merger with Indiabulls Housing Finance in October last year.
The announcement of the LOI being received by the bank came during market hours and the bank’s stock ended 4.94% higher than its previous close on the BSE at Rs 15.30.
“The bank routinely evaluates capital raising options and proposals which are in its best interest. The Bank has received preliminary, non-binding letter of intent (Loi) from M/s. Clix Capital Services Private Limited & Clix Finance India Private Limited dated June 12, 2020, which the Board of Directors of the Bank has considered for further processing in their meeting held today ( 15th June 2020),” LVB said in a notification to the exchanges.
Under the non-binding LOI, the proposed transaction is subject to completion of due diligence, which the bank and the intending parties will be carrying out and will be subject to regulatory and other customary approvals.
“In the event, the discussions between the contracting parties in relation to the proposed transactions are successful and definitive agreements are executed, we will make appropriate disclosures as required under the provisions of applicable law,” LVB added.
Raising fresh capital is critical for the survival of LVB, which has been under the regulator’s prompt corrective action (PCA) framework since September 2019. It posted a Rs 334.48-crore loss in the quarter ended December, its return on assets (RoA) was -4.4% and the net non-performing asset (NPA) ratio stood at 9.81%. The capital adequacy ratio (CAR) was 3.46% at the end of December, against the regulatory minimum of 9%. The bank’s last full-time chief executive officer (CEO), Parthasarathi Mukherjee, resigned in September.
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