LVB board to consider rights share issue
Shares of Lakshmi Vilas Bank (LVB) rose nearly 5% ahead of board meeting which is scheduled to consider rights issue.
A meeting of board will be held on October 15, 2020 to consider and approve, the issue of securities of the bank to existing shareholders of the bank on a rights basis.
Earlier, at the September 25 annual general meeting (AGM) of the bank and in an August 26 board meeting, resolutions were passed for capital raising of up to Rs 1,000 crore through options including an issue of global depository receipts, American depository receipts, foreign currency convertible bonds, follow-on public offer (FPO), rights issue or through qualified institutional placement. The board has now decided on a rights issue.
According to the media reports, most of the institutional investors of LVB were in favour of a rights issue and would subscribe to it. The bank urgently needs at least Rs 1,500 crore to meet the basic capital requirements under the regulator’s norms.
A rights issue was the most logical option for the lender as all the other options — including a follow on offer or qualified institutional placement — would require participation of new investors which “looks tough at the current stage”.
LVB plunged into a leadership crisis when shareholders, at the AGM, voted out seven directors including the interim chief executive and statutory auditor due to unhappiness with the way the bank functioned.
Following this, the RBI appointed a three-member committee of directors to run the bank.
LVB is also in the midst of a merger deal with Clix Capital. In the backdrop of the current events, the RBI wants the LVB-Clix deal to happen at the earliest. If the deal falls through, the central bank might look at other options to save the bank from a financial failure.
On October 8, LVB had informed exchanges that it received an indicative non-binding offer from Clix Group for the proposed merger.
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