Private sector lender Lakshmi Vilas Bank (LVB) is holding talks with a few large, marque investors for capital infusion, according to a top official.
LVB is already examining a merger proposal from Clix Capital Services Pvt. Ltd and its subsidiary. Due diligence is already underway.
“In addition to the proposal, we are looking for few large, marque, long-term investors as well. We will share the details as and when proposals materialise,” S. Sundar, MD and CEO, LVB told The Hindu.
On June 15, the cash-strapped bank entered into a non-binding LoI (letter of intent) with Clix Capital Services Pvt. Ltd and its subsidiary. The amalgamation is subject to completion of mutual due-diligence within 45 days and after getting regulatory and other customary approvals.
“After the 45 days window, the binding commercial terms will be finalised and a regular proposal will be submitted for consideration of RBI. Currently, the due diligence process is underway. Upon amalgamation the entire shareholders’ fund of Clix Capital of about ₹1,900 crore and total assets of about ₹4,600 crore, will get amalgamated into bank,” Mr. Sundar said.
“Therefore, as per current quick estimates of the advisors, after amalgamation of Clix Capital, the common equity tier-1 of bank might reach to reasonable threshold level stipulated under extant regulatory norms based on the present level of assets and capital. In addition to the proposal from Clix Group, we are looking for few large marquee long term investors as well in mutual consultation. We will share the details as and when it materialises,” he said.
While stating that they had raised Rs.2,002 crore in the last five years, Mr. Sundar said: “We need fresh capital of ₹2,000-₹2,500 crore to stay afloat and to improve the bank performances. We have introduced several cost cutting measures, rationalised the staff in administrative office and redeployed and focused on digital technologies. All these measures will lead to reduction in cost to income ratio.”
Meanwhile, Lakshmi Vilas Bank posted a standalone net profit of ₹93 crore for the fourth quarter ended March 2020 against a net loss of ₹264 crore recorded in the year-earlier period on account of lower provisioning and reversal of certain charges.
During the period under review, the provisions declined to ₹303 crore from ₹479 crore, according to a regulatory filing.
The fresh slippages during the period was ₹360 crore and recovery ₹162 crore. The slippages could have been lesser, but for a big corporate account amounting for ₹160 crore, which was unavoidable, he said.
Explaining the reasons for the net profit, he said it was due to combination of factors such as reversal of charges and recognising Deferred Tax Assets.
During the quarter, LVB withdrew the mandate given to Indian Banks Association to negotiate revision of salary on its behalf for both its officer staff and clerical staff. Hence, the entire provision of about ₹49 crore (including ₹24 crore for the current year) was reversed along with employees benefit amounting to ₹70 crore (including ₹45 crore for the current year). Besides, the bank also recognized net deferred tax assets aggregating to ₹1,186 crore against ₹860 crore in the light of ongoing developments for capital infusion.
Net NPAs increased to 10.04% from 7.49%, representing ₹1,387 crore and Gross NPA increased to 25.39% from 15.30 representing ₹4,233 crore. Provision coverage ratio stood at 71.25% and net interest margin at 1.56%.
The bank’s capital adequacy ratio dropped to 1.12% from 7.72% last year.
“The bank had already shifted its lending focus from Corporates to MSME, rural, commerial and retail segments. Hence, the restriction for lending to corporates due to Prompt Corrective Action framework did not have any impact on us,” he said.