Private sector lender Lakshmi Vilas Bank (LVB) is exploring various options to raise capital. While reports suggest that several investors, including DBS Bank, Capri Global, Indostar Capital Finance, and Tilden Park have shown interest, LVB's interim Managing Director & CEO S Sundar tells Business Standard that nothing has been finalised yet. In an interaction with T E Narasimhan, he elaborates the bank's future plans. Edited Excerpts:
Fresh slippages in Q3 were lower than recovery. How do you see that?
If you look at non-performing assets (NPAs) during the third quarter, there was an addition of Rs 257 crore and recovery was Rs 267 crore, so teh recovery exceeded slippage by Rs 10 crore. We were very confident of recovering another Rs 200 crore. That would have given us very good numbers, but unfortunately due to some reasons it could not be achieved. I feel confident that we should be able to achieve this during the current quarter.
RBI has put LVB under prompt corrective action (PCA). When do you see a turnaround?
The bank has received capital of Rs 1,435 crore since 2018. My provisions towards NPA was of the order of Rs 2,500 crore during the same time. Existing capital and funds raised been used to meet the provisioning requirements which created problems.
Going forward, a substantial amount is likely to be recovered. If that happens, the NPA problem can be mitigated. Close to 30-35 per cent, or about Rs 1,400 crore of NPA should be in National Company Law Tribunal.
NCLT is a slow process, but media reports have stated around 60 per cent of the cases will be settled in the next few quarters. If that happens, the recovery will be faster. Everything depends on the growth of the economy. I am confident that the economy should be back on the track in 2020-21. If everything goes well, I am hoping the bank will recover by the end of 2021.
How much capital you need to come out from these issues?
We need Rs 1,500-2,000 crore for growth, CAR and provisions. Current gross NPA is Rs 4,081 crore and net NPA is Rs 1,463 crore. Provision coverage ratio is almost 69 per cent. Going by my record of recovery, I should be able to recover more than this net NPA in one or two year's time. In two years, based on collections, these accounts will not require me to provide further.
You have been in talks with some investors. What is the status? What kind of fund raising you are looking at?
The Board has authorised us to have discussions with prospective investors. These talks would cover not only raising the capital through rights, preferential issue, or QIP, but could even extend to merger, or offering a controlling interest. We should either get a huge chunk of capital coming in, or else a merger could be a better proposal. That was why the Indiabulls Housing Finance merger was considered. Had it been through, these problems would have been solved. We are analysing all the proposals. There have been several enquiries and talks at different stages. We are trying to see some reasonable capital coming in before March 31, though not the entire quantity.
What is your strategy to improve performance?
We have identified 175 branches for gold loans and set a target of Rs 1,200 crore over a period of a year. Another focus area is Micro Small and Medium Enterprises (MSMEs), where 101 branches have been identified.
We will go for asset purchases, such as gold loan pools, which do not call for capital requirement, but at the same time increase my loan book, net interest margin and net interest income. I will be improving the profitability and showing a lower net NPA percentage even without additional capital.
We are trying to achieve close to Rs 7,000-8,000 crore of additional business next year. Corporate will be very minimal. About 15 per cent should be from gold loans, and about 35-40 per cent from MSME.