Less than a month after striking a deal with Aion Capital-backed non-banking financial company (NBFC) Clix Capital Services Pvt. Ltd for fund infusion, Lakshmi Vilas Bank“““ (LVB) chief S. Sundar has said the lender is in talks with other investors to mop up ₹1,000 crore additional capital. The bank is looking at ways to bolster its capital adequacy ratio and the merger deal with Clix Capital would bring in ₹1,900 crore for the bank.
The bank needs capital to grow and make profit, and “we have got Clix as they have expressed their interest to merge with the bank. The advantage is that they are capital surplus and we are capital deficit,” LVB managing director and chief executive officer (CEO) Sundar told PTI in an interview.
“We need capital, they have surplus capital. So I find it is a very good alignment in the sense that they have about ₹1,900 crore of capital (surplus),” he said.
While noting that the merger with Clix would give enough strength to do business, Sundar said the bank was in need of additional funds.
Explaining the deal with the Gurgaon-based investor, Sundar said Clix is bringing about ₹4,500 crore- ₹4,600 crore as assets, of which ₹1,900 crore is shareholders’ fund. “I find this is a very good alignment in the sense that they have about ₹1,900 crore of capital and their assets are about ₹4,500 crore- ₹4,600 crore or so. They may need capital allocation of 10 per cent on it, (which means) about ₹500 crore. So, there is a surplus capital of ₹1,400 crore. Thus, on merger, it should come to the bank. “After allocating ₹500 crore capital for Clix’s assets, the bank will be left with a surplus shareholders’ fund of about ₹1,400 crore from Clix, for use on the bank’s assets. This fund is sufficient for the bank. On the top of this, the bank’s advisers have also received interest from other investors to the tune of ₹1,000 crore,” he added.
In mid-June, the bank announced receipt of a non-binding letter of intent from Clix Group for amalgamation of Clix Capital Services and its subsidiary into the bank.
“In addition to the proposal from Clix Group, and the bank’s advisers, we look for few large marquee long-term investors as well in mutual consultation,” the bank had said while announcing the deal last month. When asked about the timeline to close the deal, Sundar said due diligence process was on after signing the letter of intent. “We have fixed a maximum of 45 days (to close the deal),” he added.
“On the regulatory hurdle, I don’t think there should be any issue. They (Clix) are smaller compared to our bank, they are high on capital but on asset size we have assets of ₹20,000 crore and their assets are only about ₹5,000 crore…Merger should not be very difficult in the normal way,” Sundar said.
