Wednesday, April 21

With fresh capital, Lakshmi Vilas Bank looks to avoid Prompt Corrective Action

KOLKATA: Private sector Lakshmi Vilas Bank has raised Rs 460 crore in a share sale from multiple investors helping it improve the finances which is battling to avoid getting into the Prompt Corrective Action of Reserve Bank of India.

The Chennai-based lender will now try to work out a balance on how the fresh equity would be allocated between meeting regulatory requirements and growth capital.

While the capital will address the short term needs, the bank may look at other avenues to mobilise more resources for growth funding.

“This fund raising will help the bank in strengthening its capital base and will enable bank to further raise tier II capital,” the bank said in a statement.

It would need to make provision against loan losses as well as set aside capital to prop up adequacy ratios which fell sharply to 7.57% at the end of December last year from 9.67% in the preceding quarter. Its net non-performing assets slipped to 7.64% breaching the first level risk threshold of 6%. The bank has been making losses for the past five successive quarters.

“The bank has been in touch with RBI and the management has informed them that efforts are on to turn around,” a person familiar with the matter said.

The central bank has relaxed the PCA norms and lifted five state-owned banks including Allahabad Bank, Bank of India and Bank of Maharashtra, Corporation Bank and Oriental Bank of Commerce out of the restrictive framework even the first three of the lenders still have negative return on assets. These banks primarily used the government’s capital infusion to meet regulatory requirements to exit PCA.

LVB has mobilised the capital by placing shares to institutional investors through qualified institutional placement (QIP) at Rs 72 per equity shares. This was part of its Rs 2000 crore capital raising plan announced last June.

The QIP closed on March 15. SREI Capital Market Ltd was the lead manager to the issue.

Its share price closed at 65.70 Friday on BSE.

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