Private sector lender Lakshmi Vilas Bank on Thursday said its board has approved raising up to ₹500 crore through a rights issue.
“The board at its meeting held today 15 October 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,” it said in a regulatory filing.
At 0216pm, shares of the lender traded at ₹17.7 apiece on the BSE, down 3.3% from the previous close.
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.
The bank, currently in merger discussions with the Clix Group, is in dire need of funds 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 had reported a net loss of ₹112.28 crore for the June quarter compared to a loss of ₹237.25 crore in the year-ago quarter.
The private sector lender, which has been under the Reserve Bank of India’s prompt corrective action (PCA) since September 2019, had said on 8 October that it has received an indicative non-binding offer from Clix Group. PCA entails curbs on high-risk lending, setting aside more money on provisions and restrictions on management salary.
Meanwhile, its shareholders recently voted against the appointment of seven directors to its board, including S Sundar, as the managing director and chief executive officer. Apart from the CEO’s appointment, shareholders also rejected the appointments of N Saiprasad, K R Pradeep and Raghuraj Gujjar as non -executive and non-independent directors, and, B.K. Manjunath, Gorinka Jaganmohan Rao and Y.N. Lakshminarayana Murthy as non-executive and independent directors.
These appointments were taken up for voting at the bank’s annual general meeting (AGM) on 25 September.
“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 (IIAS) had said in a report on 4 September.
The shareholders voted against these directors basis the bank’s growing levels of bad loans NPAs and uncertainty related to going concern, an institutional investor had told Mint on condition of anonymity.
