Clix Capital, which was in advanced talks with Lakshmi Vilas Bank (LVB) for a possible merger, may approach the Reserve Bank of India (RBI) for clarity on the future of the deal after the bank’s shareholders voted seven Board members, including its managing director, said two people directly familiar with the matter.
The non-bank finance company (NBFC) expects the Reserve Bank to communicate a final decision on the matter within two weeks, the people said on condition of anonymity.
“While the merger talks were proceeding smoothly, the sudden change of management at Lakshmi Vilas Bank could potentially cause the deal to go awry,” said one of the two people cited above.
The second person, a senior official at Clix Capital, said: “We hope that the new management will be open to the merger.”
“However, if the transaction is not completed in the next fortnight or month, there is the possibility that the Reserve Bank merges the bank with another bank with a more solid balance sheet,” added the person mentioned above.
On September 25, Lakshmi Vilas Bank shareholders voted against the appointment of seven directors, including S. Sundar as CEO and CEO.
Furthermore, the shareholders rejected the appointments of N. Saiprasad, KR Pradeep and Raghuraj Gujjar as non-executive and non-independent directors, and of BK Manjunath, Gorinka Jaganmohan Rao and YN Lakshminarayana Murthy as independent directors.
The struggling private sector bank is desperately seeking capital and is in talks with Clix Group for a merger.
The bank’s capital adequacy ratio fell to 0.17% on June 30, compared to a regulatory low of 10.875%.
The lender, however, reduced his loss to ₹Rs 112.28 crore in June quarter ₹237.25 million rupees in the previous year.
At the bank’s annual general meeting, he had received shareholder approval to raise up to ₹Rs 1,500 crore to finance business growth and increase foreign participation up to 74%.
“It is not an easy purchase. They will end up spending a lot of time addressing governance issues. In terms of equity ownership, whoever buys will need significant ownership and control, “said the second person quoted above.
The private sector lender said earlier this month that mutual due diligence for its deal with Clix Group is “substantially complete.”
On July 30, Lakshmi Vilas Bank said that its agreement with Clix Group could be delayed due to the covid-19 pandemic, and both parties had agreed to extend the exclusivity period until September 15.
The bank has signed a preliminary and non-binding letter of intent with Clix Capital Services Pvt. Ltd and Clix Finance India Pvt. Ltd in connection with Clix Group’s proposed merger with the bank in June.
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