At Lakshmi Vilas Bank’s last annual general meeting on Friday, shareholders disapproved of the continuity of seven of the board members. These include S Sundar, the CEO and CEO whose appointment RBI had recently approved. Also rejected:
- N Saiprasad, non-executive and non-independent director
- Gorinka Jaganmohan Rao, Non-Executive and Non-Independent Director
- Raghuraj Gujjar, non-executive and non-independent director
- KR Pradeep, non-executive and non-independent director
- BK Manjunath, non-executive and independent director
- YN Lakshminarayana Murthy, Non-Executive Independent Director
The vote appears to be against promoter KR Pradeep and the people long associated with him on the board. The talk of the market is that the entities that had bought into the bank’s QIP a year ago have voted against the former developer and his team. For RBI, the concern is that there is now no identifiable administration and the regulator may have to step into the void. All that remains of the board are three independent directors and the RBI nominees.
Also read: Lakshmi Vilas Bank seeks to reassure depositors after CEO, directors ousted at AGM
While the Clix group and Aion are doing due diligence and evaluating the option to invest, the events of the weekend can make the wait costly. In its latest result, the bank reported a negative level one index of -1.83 percent. Level one is pure social capital and that is negative. It means that there is no skiN shareholder left in the game on any loan. The first quarter loss was Rs 112 crore, but the fiscal year 20 losses were Rs 836 crore. Twenty-five percent of loans have defaulted, although to be fair, 72 percent are provisioned, and thus net delinquent assets are 9.6 percent more manageable. COVID may have wreaked more havoc.
Bank depositors have been voting with their feet. Deposits in the June quarter stood at Rs 21,161 cr, down 27 percent from the prior year levels and 1.3 percent from the prior quarter. Depositors may not welcome the news of the gap at the top after the last AGM.
And any adverse news may worry other former private sector bank depositors.
On the plus side, it’s not a big deal: Rs 21 billion of deposits, of which more than 30 percent would be in government securities, poses a relatively small problem for any large private bank to take over. But the RBI may have to play matchmaker or at least marriage counselor. Perhaps it is better to act fast.
At press time, LVB has issued a statement indicating that it continues to have a fully functional board that includes three independent directors. Until a new CEO is appointed, the bank’s senior management will carry out the day-to-day functions. The bank added that its liquidity position is comfortable and its LCR is 240 percent. The bank will continue to assess the proposed merger with the Clix group and, furthermore, that the mutual due diligence is substantially complete.
