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Home / Industry / Banking /  Turmoil at Lakshmi Vilas Bank puts Clix deal in jeopardy

Clix Capital, which was in advanced talks with Lakshmi Vilas Bank (LVB) for a potential merger, may approach the Reserve Bank of India (RBI) for clarity on the future of the deal after the bank’s shareholders voted out seven board members, including its managing director, two people directly aware of the matter said.

The non-banking financial company (NBFC) expects the Reserve Bank to communicate a final decision on the matter within two weeks, the people said on the condition of anonymity.

“While the merger talks were progressing smoothly, the sudden change of management in Lakshmi Vilas Bank can potentially throw the deal off gear," said one of the two people cited above.

The second person, a senior official at Clix Capital, said: “We hope that the new management will be open to the merger."

“However, if the transaction doesn’t go through in the next fortnight or month, then there is a likelihood that the Reserve Bank will merge the bank with another bank with a stronger balance sheet," the person mentioned above added.

On 25 September, shareholders of Lakshmi Vilas Bank voted against the appointment of seven directors, including S. Sundar as the managing director and chief executive.

Besides, shareholders 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 independent directors.

The struggling private sector bank is desperately looking for capital and is in talks with the Clix Group for a merger.

The bank’s capital adequacy ratio fell to 0.17% as on 30 June as against a regulatory minimum of 10.875%.

The lender, however, narrowed its loss to 112.28 crore in the June quarter from 237.25 crore in the year earlier.

At the bank’s annual general meeting, it had received shareholders’ approval to raise up to 1,500 crore to fund business growth and increase foreign shareholding up to 74%.

“It’s not an easy buy. They will end up investing a lot of time in dealing with governance issues. In terms of shareholding, whoever buys will need significant control and shareholding," said the second person cited earlier.

The private sector lender said earlier this month that the mutual due diligence for its deal with Clix Group is “substantially complete".

On 30 July, Lakshmi Vilas Bank said its deal with the Clix Group might be delayed owing to the covid-19 pandemic, and both the parties had agreed to extend the exclusivity period till 15 September.

The bank has signed a preliminary, non-binding letter of intent with Clix Capital Services Pvt. Ltd and Clix Finance India Pvt. Ltd in relation to the proposed amalgamation of Clix Group with the bank in June.

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