Lakshmi Vilas Bank, Clix Capital reaffirm commitment to ongoing merger

Major portion of due diligence completed; application to RBI is likely in one - two weeks

Lakshmi Vilas Bank (LVB) and Clix Capital executives have reaffirmed their commitment to the ongoing merger talks, following speculation that the deal was being called off. 

They have also quashed rumours of the merger being regulator-imposed.

“It is about when the application will be placed before the regulator,” Shakti Sinha, member (committee of directors), told Business Standard. 

He said the bank was highly committed and would do what it took to see the merger come through.

“From our end, discussions were halted for a day or so because we needed to give the new team time to settle down,” said a senior Clix executive. 

Clix is said to have set three vital conditions. 

First, the firm is keen on a majority stake. 

“A minimum of 51 per cent shareholding is a prerequisite, while they would be open to increasing their stake to 74 per cent if permitted by the RBI,” said a person working on the transaction.

Second, Clix would not want its stake mandatorily locked in, and is willing to reduce it to the current regulatory threshold of 15 per cent in 8-10 years. 

“If Clix has to reduce its stake ahead of the timeline slated in the merger proposal, they would want to have the leeway to do so,” said the person quoted above.

Third, the directors of Clix will seek indemnity from future claims made against the bank pertaining to its business before the merger, as reported by Business Standard earlier. People privy to discussions also said that given the significance, these conditions may not stall the deal. 

“Final contours of the merger are being discussed and, if agreeable to LVB and Clix, an application to the RBI will be made in a week or fortnight,” said another person aware of the development.

Sinha said the bank would simultaneously evaluate fund-raising options. “Once the merger application is furnished, a follow-on public offer or rights issue will be considered,” he said, adding: “This is not a Plan B.” 

Allaying fears regarding liquidity, Sinha said there had been no bank run since Monday. Even as LVB’s Tier-1 capital stood at 0.17 per cent as of September 27, liquidity coverage ratio at 262 per cent was well above the regulatory threshold of 100 per cent. 

Further, the bank met its Tier-2 coupon obligation of Rs 15 crore on Wednesday.

As regards operations, two of the bank’s top officials — G Sreeram, president (wholesale banking) and Meenakshi Sundaram, president and chief operating officer — are closely involved in managing day-to-day affairs, besides the committee of directors.