Appointment of KN Madhusoodhanan, Sreesankar Radhakrishnan and Nirmala Padmanabhan to the board of Dhanlaxmi Bank on Wednesday paved the way to restart the bank’s capital raising efforts. Earlier during the day, the warring shareholders led by B Ravindran Pillai and Gopinath (collectively holding about 20 per cent stake in the bank) withdrew their demand for extraordinary general meeting scheduled for November 12.

Sources in the know say it a sign of peace struck between the management and warring shareholder faction of the bank. In fact, it is gathered that the incoming directors could be representatives of these shareholders.

“Since they are more likely to satisfy the fit and proper criteria of the Reserve Bank of India, the board decided to go ahead with the appointments,” said a person aware of the matter.

With quorum being restored at the board, approvals for rights issues may soon be sought. Centrum Capital has been appointed as bankers to the rights issue.

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“The pricing needs to be reworked, though the issue is likely to be rolled out at 20–30 per cent discount to the market price,” said another source closely involved in the fund raise.

Earlier, a price band of ₹10.25-10.50 a share was fixed for the rights issue, though the bank’s stock price has risen by 19 per cent in the last three months. If approvals come through this month, the bank plans to close in on the issue by January 2023 as a debt of ₹60 crore currently classified as tier-2 bonds is due for retirement in March 2023.

It is estimated that about 20–30 per cent of the current shareholders of the bank may not be able to participate in the rights issue. This includes the five per cent stake held by Kapil Wadhawan, former promoter of Dewan Housing Finance that is currently under freeze by the Enforcement Directorate.

“The bank has started engaging with some of the large financial institutions with whom the bank has business relationships and product tie-ups,” said the sources. The bank is in talks with these companies to raise ₹300 crore of tier-2 bonds in March 2023 when it retires the tier-2 bond liabilities.