Lakshmi Vilas Bank gets indicative non-binding offer from Clix Group

The bank's weakening performance, rising slippages in corporate book and the impact on profitability and risk-weighted asset portfolio may further increase capital requirement

Lakshmi Vilas Bank (LVB) on Thursday said it has received an indicative non-binding offer from the Clix Group.  Officials of the bank said this is the first time the lender has received an offer officially, while the last one was only Letter of Intent (LoI).

LVB said further to the process of considering and evaluating the proposed amalgamation with Clix Capital Services Private Limited, Clix Finance India Private Limited and Clix Housing Finance Private Limited (collectively, the Clix Group), the bank has received an indicative non-binding offer from Clix Group. 

On September 15, LVB announced that the mutual due diligence with Clix Capital is "substantially complete", and the parties are in discussions about the next steps. The bank was first approached by Clix Capital, a part of the Clix Group and majority-owned by Mumbai-based private equity firm AION Capital Partners, with a letter of intent in June. AION is a partnership between New York-based Apollo Global Management and ICICI Venture, a unit of India’s ICICI Bank

It may be recalled that at LVB's recent annual general meeting (AGM), shareholders had voted out seven directors including the promoter and Managing Director and CEO.

Speaking to Business Standard, Shakti Sinha, a director on the board of LVB and one of the three members of the RBI-appointed committee to manage the bank said that this is the first time the lender has officially received a non-binding offer, and that the earlier one received in June was only the letter of intent (LOI).

Sinha said, two members from the Board with technical domain are looking at the papers on various aspects including classification of assets, provision etc, before they come to final value.

He said, hopefully in the next one week there will be a clear picture after understanding the finance better.

"While they (Clix) want to close in the next one week, we don't want to rush without understanding the finance better and addressing all the issues. Yes the Bank is in desperate need of capital, we are aware about that also," said Sinha, adding that the new offer has not discussed anything on the value of swap ratio and others.

As of June, LVB's Basel-III compliant CAR slumped to 0.17% from 1.12% in the previous quarter. The bank's tier-1 capital ratio turned negative and worsened sequentially to (-)1.83% in April-June from (-) 0.88 per cent, compared with the minimum requirement of 8.875 per cent.

With negative tier-I and CET-1 ratios, and the capital adequacy ratios are critical for the banks' financial strength. A substantial amount of capital infusion is essential to address the concern. 

The bank's weakening performance, incremental slippages from the corporate book, its impact on profitability, as well as the risk-weighted asset portfolio of the bank may further increase the capital requirement, says Brickwork Ratings.
 

Officials said, if there is a capital infusion about Rs 1,200 crore, then the operating profit in three years will be about Rs 100 crore. 

The bank, in the past, has been wooed by SREI Capital. It even (almost) walked down the aisle with India Bulls Housing Finance, till RBI objected. The most recent merger proposal has come from AION-backed Clix Capital and discussions with them continue.

LVB shares rose by 7.23 per cent to Rs 17.80 per cent on the BSE on Thursday.