Kanorias likely to gain from Lakshmi Vilas Bank's boardroom battle

SREI may up stake; differences between Kanorias, promoter may have led to crisis

Lakshmi Vilas Bank (LVB) is readying up a rights issue of around Rs 500 crore even as it works on a merger with Clix Capital. The rights issue opens up a window of opportunity for SREI to raise its stake in the bank, which is currently at 3.34 per cent.

“The proposal (for a rights offering) is before the board, and a decision may be expected in a week,” said a top source. It was explained that while the merger with Clix remains on the table, “It is important that we raise some amount of capital soon, and, therefore, the rights float.”

While SREI can technically hike its stake to 10 per cent with the Reserve Bank of India’s (RBI’s) approval, “it is too early to state if it will, indeed, exercise this option,” said a source.

SREI lost out on a chance to get a banking licence in 2013. While it is said that the Kanorias of SREI viewed their shareholding “only as an investment”, they had not altogether stopped seeking an entry into the banking space.

It is understood that the Kanorias are drawing support from investors like Capri Global, and a few insurers, and were instrumental in halting K R Pradeep’s 13-year-long board stint at the AGM last week. Six other directors — including the bank’s interim chief executive S Sunder, believed to be close to Pradeep — also lost their seats.

The boardroom changes were the outcome of a pitched battle. Informed sources said the exits were orchestrated meticulously by making use of the rift between the two promoters — Pradeep and MP Shyam, whose family has held a stake in LVB almost since its inception in 1926.

SREI and Capri Global have long evinced interest in LVB and held several rounds of informal talks with Pradeep. These gathered momentum after the RBI turned down the LVB–IndiaBulls Housing mer­ger proposal in October 2019.

It is believed, however, that Pradeep declined to take these proposals to the board, citing regulatory clearance. When the US PE major Apollo Global through its Indian investment arm, Clix Capital, took a merger proposal to LVB, Pradeep was keen on pursuing it. He met resistance from the board, mainly from those on the Kanorias’s side. Questions on Clix’s efficiency and track record were raised, and the key contention was that Clix was seen as being privileged over SREI.