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M. Ramesh

Chennai, Aug. 14 A resolution of Lakshmi Vilas Bank to raise funds through issue of shares to qualified institutions was passed by shareholders on Thursday at the annual general meeting, after the management agreed to modify the resolution.

Sources said that a number of shareholders spoke in opposition, but voted for it after the management modified the resolution to the effect that the shares will be sold at a price not less than 2.5 times the book value at the time of placement of shares.

Lakshmi Vilas Bank’s book value today stands at around Rs 85. At this level then, the shares cannot be placed at Rs 212.50 a share. On the National Stock Exchange, the bank’s shares closed today at Rs 94, less than Rs 0.45 than the previous close.

The Bank’s Managing Director, Mr V. S. Reddy, told Business Line today that the management decided to modify the resolution to allay fears that the shares would be given away at a low price.

He said the dilution will not be more than 25 per cent of the enlarged capital.

Speaking to Business Line, both sides — those who opposed the resolution and the management — claimed victory. Mr Reddy said placing shares at 2.5 times the book value would be no big deal. He pointed out that the bank, whose capital adequacy is at a comfortable level of 13 per cent, could afford to wait until the market sentiment improves.

On the other hand, those who opposed the resolution, said they had practically defeated the resolution, because it would be impossible to raise funds at such a high price, especially when the bank is not doing all that well. They pointed out that in the first quarter of the current year, the bank’s net profit had slid to Rs 4.28 crore compared with Rs 15.09 crore in the corresponding quarter last year.

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