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With IBHF deal taking time, capital-starved LVB looking at PE investment


Press Trust of India Mumbai
Lakshmi Vilas Bank (LVB) Tuesday said it is not "unduly worried" about prospects of its merger plans with non-bank lender Indiabulls Housing Finance but is looking to raise money from private equity investors to take care of immediate capital requirements.
The south-based lender, which narrowed its loss to Rs 264 crore for the March quarter from the Rs 622 crore in the year-ago period, admitted to being capital starved which resulted in contraction of the overall business.
"We are looking at other sources of capital which will include raising money from a private equity investor at the earliest to help the bank," its managing director and chief executive Parthasarathi Mukherjee told PTI over phone.
He said as the merger plan with IBHF will take time, the bank has initiated negotiations with the financial investors on board at the earliest, but did not disclose the stake which will be picked up or the quantum of money which will be infused.
Mukherjee said IBHF should not have a problem with such an arrangement, when asked if the plan has been sounded off to them.
The bank's core tier-I capital adequacy has fallen to 5.72 per cent, much below the regulatory requirements, which is resulting in the immediate plan, he said, adding that this is not a plan B and the merger proposal continues to be on track.
There is also a plan to raise Rs 188 crore through a preferential allotment of shares to IBHF, he said.
Interestingly, before announcing its plan to merge with IBHF in April, the bank was reported to be in talks with private equity players to raise funds. Earlier this month, IBHF announced a new plan wherein IBHF and its subsidiary Indiabulls Commercial Credit will merge into the bank.
The Indiabulls group has entities in the realty business and the deal is being watched very closely, given the RBI's stated discomfort to allow any entity with an exposure to the realty business into banking. There are reports of the Indiabulls Group mulling to exit the realty business.
Mukherjee declined to give a possible timeline for the merger proposal, saying clearances from multiple entities including the RBI, Sebi and Competition Commission.
"We are not unduly worried," he said, when asked about the prospects of the merger given presence in realty of its partner.
The bank could narrow the loss in the March quarter largely on lower provisioning (Rs 478 crore versus Rs 921 crore) and Mukherjee added that the amount of money set aside this year included Rs 150 crore of contingency provisioning for likely loan losses.
He said the recoveries (Rs 213 crore) have come larger than the slippages (Rs 207 crore) during the quarter, and added that the fresh non performing assets are from 600 accounts with the largest being Rs 20 crore.
The gross non performing assets ratio currently stands at 15.03 per cent as against 9.98 per cent in year-ago period.
Mukherjee said the ratio has grown because of the denominator effect, as the bank has had to contract its advances book by 19 per cent due to capital constraints.
The core net interest income came at Rs 140 crore, while the other income was at Rs 57 crore.
The bank scrip slipped 1.07 per cent to close at Rs 73.75 apiece on the BSE, as against a 0.17 per cent rise in the benchmark.

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First Published: May 28 2019 | 9:05 PM IST

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