Shares of Dhanlaxmi Bank witnessed a volatile trading session on Monday, after the exit of independent director Sridhar Kalyanasundaram from the board of the bank, effective September 1.

In a letter shared with the exchanges on Sunday, Kalyanasundaram cited issues of governance and unethical practices at the bank as his reason for stepping down. He had joined the bank in December 2022.

He was also the chair of the Risk Management Committee of the Board, and member of the Audit Committee, Credit & Business Committee, Large Value Fraud Monitoring Committee, NPA Monitoring Committee, Corporate Social Responsibility Committee, IT Steering Committee, Redressal Committee, and Equity Issuance Committee.

Stock performance

Shares of the private sector lender opened 4.4 per cent lower on Monday at ₹27.95, falling further through the day to touch an intraday low of ₹26.55. However, thereon it gradually started recovering and touched a 52-week high of ₹33.80 intraday. The stock later pared some gains to end 4.4 per cent higher at ₹30.55 on the NSE.

In his letter, Kalyanasundaram said that he had little support from other board members on issues of the bank, who instead chose to support the “belligerent attitude of the MD & CEO - who is on public record (in the vernacular press) that he cares little for shareholders and the directors”.

Issues on paper

Issues highlighted include the bank trying to bulldoze its rights issue despite several concerns around the Issue Agreement proposal, and the conduct of a few board members in deliberately trying to stifle discussions by other board members. He also accused the MD and CEO Shivan J K of deciding on the agenda and frequency of all committee meetings, including those of independent directors, and not ensuring the regulatory requirement of quarterly meetings for the Risk Management Committee.

The board has also been accused of of dismissing any anonymous or signed ‘whistle-blower’ complaints, received frequently by the bank, and which have included issues like ‘material suppression of facts by some board members’.

Kalyanasundaram also alleged unethical conduct, saying that the bank used a one-time settlement for Kolkata-based Jalan Hotels to release a guarantor even after the original debtor had been cleared by the consortium lenders. The bank offered a hugely discounted offer of ₹5.25 crore against a reported market value of ₹35 crore.

He also said that the board and management dismissed all concerns raised by a minority shareholder on the validity of the appointment of MD and CEO based on the opinion of a private legal counsel rather than referring the matter to an adjudicating authority as advised by some board members.

“I am left wondering if the pressure is being brought (through an action by a Majority Shareholder) on me to avoid such an escalation,” he said adding that the bank might use the opportunity to rectify the issue prospectively, if and when the current incumbent’s contractual tenure comes to an end in January 2024.

“I wish the Bank will be able to ward off the next round of predatory acquisitions that might be the effect if the proposed rights issue is taken forward, on my exit from the Board,” he said.