Chennai-headquartered Lakshmi Vilas Bank (LVB), where shareholders had recently voted against the appointment of seven directors including the chief executive and managing director, said on Thursday that it had received an indicative non-binding offer from the Clix Group. The offer suggests the private equity firm comprising Clix Capital Services Private Limited, Clix Finance India Private Limited and Clix Housing Finance Private Limited would be amalgamated with LVB. According to the offer, Clix Group’s stake in the struggling bank could exceed 74 per cent with its capital infusion of Rs 1,500–1,700 crore.
Clix, backed by AION Capital, had submitted its letter of intent to LVB on June 15. AION, a partnership between New York-based Apollo Global Management and ICICI Venture, saw the two entities parting ways on June 10. But, the funds continue.
“There will be a capital infusion alongside the merger, possibly taking Clix Group’s stake in the bank to 90 per cent,” said an investment banker working on the transaction. However, the foreign shareholding in the bank would not cross 74 per cent. According to the Banking Regulation Act, foreign entities can hold up to 74 per cent stake in Indian banks.
Also, Clix has sought an exemption from the three-year lock-in period for sale of shares. Such an exemption was given to Fairfax, which acquired 51 per cent stake in CSB Bank.
Clix Group declined to comment on the matter.
LVB recently amended its foreign holding clause to accommodate up to 74 per cent holding. “What the LVB board needs to discuss is whether its existing shareholders are comfortable with their stake reducing to 10 per cent after the merger,” another source said.
The LVB board is set to meet on Friday to deliberate these terms. Speaking to Business Standard, Shakti Sinha, member, committee of directors, LVB, said that various aspects including classification of assets and provision, among other things, would have to be evaluated before the bank’s decision on the offer. “In the next one week there will be a clear picture. We don’t want to rush into it,” he added.
The bank is also planning to roll out a rights issue of Rs 600–700 crore to infuse capital. At present, at a negative 1.83 per cent tier-1 capital and 0.17 per cent capital adequacy ratio (CAR), LVB lags the minimum CAR requirement of 8.875 per cent by a huge margin.
LVB’s share price rose 7.23 per cent to Rs 17.80 on BSE on Thursday.