Shareholders of Lakshmi Vilas Bank divided on merger with Clix group

Some large investors are uncomfortable with Clix group's proposal to take up to 90% stake in the bank

The board of directors at capital-starved Lakshmi Vilas Bank (LVB) are set to meet on Thursday to firm up on a rights issue amounting to up to Rs 1,000 crore. Deliberations on the proposed merger with Clix Group may also be an agenda, according to highly placed sources. 

Clix Group — represented by Clix Capital Services Private Limited, Clix Finance India Private Limited, and Clix Housing Finance Private Limited -- furnished a non-binding merger offer to LVB on October 8.

Thursday’s meeting would be the first time that the board would formally review Clix’s proposal. 

While the finer details of the transaction have not been revealed by either party, it has been gathered from sources that Clix Group’s stake in the bank could exceed 75 per cent. 

The non-banking financial company may also infuse Rs 1,000-1,500 crore into the bank and this can take Clix Group’s combined stake to 90 per cent post-merger.

A section of investors privy to the terms put forth by Clix Group, however, have expressed reservations on the proposal. “Some existing investors feel their shareholding can be drastically marginalised if the offer from Clix has to be accepted in its current form,” said a person with knowledge of the development. 

LVB has a widespread shareholding. Retail participation in the bank stood at 22.75 per cent, according to exchange filing for the June 2020 quarter. While the combined stake of foreign and domestic institutional investors stands at 17.27 per cent, a significant chunk of LVB's shares is held by Indian corporates (33.7 per cent) and high net-worth individuals (19.3 per cent).

Among the prominent corporates, SREI Infrastructure Finance and Capri Global hold 3.34 per cent and 3.93 per cent, respectively, in LVB. Both these investors have in the past expressed their interest to acquire a majority stake in the bank, though neither of them placed their interest formally to the bank’s board.

“The dissent to Clix’s proposal is from a segment of large non-retail investors who have a reasonable association with the bank,” said the person quoted above. He clarified that official deliberations have not taken place with shareholders. “These are only initial feedback which some members of the board have received,” he said. 

Only after LVB’s board clears the offer, the proposal from Clix can be put forth for shareholders’ approval. Whether the board will take a final call on the merger proposal in Thursday’s meeting is unclear. 

“Even if valuations are not acceptable at this juncture, the offer cannot be rejected without further negotiations with Clix,” said a senior official at LVB.

After the ouster of seven of LVB’s board members, including its MD & CEO, on September 25, the bank’s day-to-day operations are being overseen by independent directors -- Shakti Sinha, Meeta Makhan and Satish Kumar Kalra, who form part of the Committee of Director.