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Lakshmi Vilas Bank shareholders vote against reappointment of top brass

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A large section of shareholders of Lakshmi Vilas Bank (LVB) voted against the reappointment of the bank’s Managing Director & CEO, seven directors, and auditors at the Bank’s Annual General Meeting (AGM).


Among the non-independent directors voted out is KR Pradeep, one of the promoters. He held a 2 per cent stake in the bank as on June 30, 2020, according to a filing with the BSE.



This may become the first case to be dealt with under the recently amended Banking Regulations Act which empowers RBI to consider reconstruction or amalgamation of a bank without imposing a moratorium.


The development comes at a time when LVB is on the verge of signing a deal with AION-backed and Pramod Bhasin-founded Clix Capital for a merger and is in the process of raising capital. The bank, in the past, has been wooed by SREI Capital. It nearly walked down the aisle with India Bulls Housing Finance, till RBI objected.


The bank has been under RBI’s Prompt Correction Action (PCA) regime since September 27, 2019 due to a weak credit profile with high level of bad loans and low capital and losses. It faces curbs on lending to corporates and stressed and high risk sectors.


The lender’s net non-performing assets stood at 9.64 per cent with capital adequacy of just 0.17 per cent. The bank’s Tier 1 Capital ratio turned negative, at – 0.88 per cent and – 1.83 per cent as on March 31, 2020 and June 30, 2020, respectively, as compared to the minimum requirement of 8.875 per cent. It reported a loss of Rs 112.28 crore in Q1FY21. The lender had incurred a loss of Rs 836.04 crore in 2019-20. The bank has been incurring losses for the past 10 quarters.




Nearly 60 per cent of the shareholders voted against the resolutions, which sought r-eappointment of LCB’s interim MD&CEO Sundar, and seven independent directors. Some of the shareholders said they were unhappy with the way the bank is managed and the deterioration in its finances.


Bank officials did not comment on the development.


The bank has filed voting results with the BSE and it showed that resolutions which were not passed include the reappointment of S Sundar, executive director – managing director and CEO of the Bank, along with the reappointment of seven independent directors including N Saiprasad, Gorinka Jaganmohan Rao, Raghuraj Gujjar, K R Pradeep, B K Manjunath, and Y N Lakshminarayana.


The shareholders also voted against the re-appointment of statutory auditors (P Chandrasekar LLP, Chartered Accountants) and branch auditors. The appointment of only three directors was cleared by shareholders. This includes Shakti Sinha, Satish Kumar Kalra, and Meeta Makhan. In addition, there are two Reserve Bank of India appointed directors on the board.


Institutional Investor Advisory Services (IiAS) recommended voting against four appointments including Saiprasad, Gujjar, Pradeep and Manjunath, but not for other resolutions including Sundar’s reappointment.


The proxy advisory firm, Institutional Investor Advisory Services’s (IiAS) Managing Director Amit Tandon said that the shareholders had sent a message to RBI and it was up to the RBI to decide whether it wanted a fund raising, appointment of a CEO and auditor and even its future as a stand-alone bank. He did not comment on the voting against Sundar’s appointment.


Sundar, 65, has 41 years of work experience with Andhra Bank, City Union Bank and LVB. He was the CFO of LVB from April 2018 till December 31, 2019. Former MD & CEO, Parthasarathi Mukherjee resigned in August 2019 and Sundar was appointed MD & CEO (Interim) from January 1, 2020 for 11 months.


Under PCA, the bank has to bring in additional capital, restrict further lending to corporates, reduce NPAs and improve the Provision Coverage Ratio to 70{f08ff3a0ad7db12f5b424ba38f473ff67b97b420df338baa81683bbacd458fca}. There has been a steady decline in the bank’s deposit base since September 2019 and an increase in NPA ratios.


In June, LVB signed a Letter of Intent with the Clix Group for the proposed amalgamation of Clix Capital Service Pvt Ltd and Clix Finance India Pvt Ltd into the bank. Upon amalgamation, the entire shareholders’ fund of Clix Capital of around Rs 1,900 crore and total assets of around Rs 4,600 crore, will get amalgamated into the bank. Currently, the due diligence is underway.

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