India: Board approves Lakshmi Vilas Bank’s $68m rights issue

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Private sector lender Lakshmi Vilas Bank on Thursday said its board has approved raising up to ₹500 crore through a rights issue.

“The board at its meeting held today 15 October 2020 have considered and approved, inter-alia, subject to the necessary approvals, the raising of funds by issuance and allotment of equity shares or such other eligible securities of the Bank, for an aggregate amount of up to ₹500 crore by way of a rights issu,” it said in a regulatory filing.

At 0216pm, shares of the lender traded at ₹17.7 apiece on the BSE, down 3.3% from previous close.

Under a rights issue, the company allows only existing shareholders to participate in the fundraise. Some of the large shareholders in Lakshmi Vilas Bank are India Opportunities Growth Fund Ltd – Pinewood Strategy (3.74%), Aviator Emerging Market Fund (2.49%), JM Financial Services Ltd (3.88%), Srei Infrastructure Finance Ltd (3.34%) and Indiabulls Housing Finance Ltd (4.99%), among others.

The bank, currently in merger discussions with the Clix Group, is in dire need of funds to meet regulatory requirements. Its capital adequacy ratio (CAR) as per Basel III guidelines contracted to 0.17 % as on 30 June, as against a regulatory minimum of 10.875%. The bank had reported a net loss of ₹112.28 crore for the June quarter compared to a loss of ₹237.25 crore in the year-ago quarter.

The private sector lender, which has been under the Reserve Bank of India’s prompt corrective action (PCA) since September 2019, had said on 8 October that it has received an indicative non-binding offer from Clix Group. PCA entails curbs on high-risk lending, setting aside more money on provisions and restrictions on management salary.

Meanwhile, its shareholders recently voted against the appointment of seven directors to its board, including S Sundar, as the managing director and chief executive officer. Apart from the CEO’s appointment, shareholders also 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 non-executive and independent directors.

These appointments were taken up for voting at the bank’s annual general meeting (AGM) on 25 September.

“Many of these directors have rotated on-and-off. We believe that a part of the accountability for the bank’s deteriorating performance over the last few years rests with its slate of non-independent directors,” Institutional Investor Advisory Services (IIAS) had said in a report on 4 September.

The shareholders voted against these directors basis the bank’s growing levels of bad loans NPAs and uncertainty related to going concern, an institutional investor had told Mint on condition of anonymity.

This article was first published on livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.