The Hindu Business Line : Lakshmi Vilas Bank to offer board seat to Federal Bank

In discussions with some shareholder groups today, Lakshmi Vilas Bank agreed to withdraw its proposal for a Rs 250-crore Qualified Institutional Placement (QIP) issue.

Sources told Business Line today that it was also agreed that after the Annual General Meeting on August 14, Lakshmi Vilas Bank will invite Federal Bank to take a seat on its board.

Federal Bank has 4.99 per cent holding in LVB.

This development is seen as the first step towards an eventual merger of LVB with Federal Bank, which has made no secret of its intention to take over LVB and a few other banks in the region.

Federal Bank has 4.99 per cent in South Indian Bank and has recently bought a similar holding in Catholic Syrian Bank.

The decision to withdraw the QIP was prompted by a representation made by one Mr K.R. Pradeep, whose family and associates have 5 per cent stake in LVB.

“The LVB Board was gracious enough to invite us for a discussion,” Mr Pradeep told Business Line today.

It is understood that shareholders, who opposed the idea of a QIP made to unknown persons, suggested to the LVB management that while the need for capital is undisputed, QIP may not be the best option to raise funds.

It is learnt that Federal Bank supported the idea of dropping the resolution for the QIP that was to be placed before the shareholders on August 14.

“After the AGM, we will extend an invitation to Federal Bank to take a board seat,” said another shareholder, who did not want to be named. Sources in the know also hint at the possibility of a rights issue.

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