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Mumbai, July 24
The long-standing tiff between the key investors led by B Ravindran Pillai and Gopinath of Dhanlaxmi Bank and the bank’s management has been resolved. Consequently, the bank is set to roll out its rights issues for ₹120 crore at a price of ₹10 –10.5 a share in two weeks.
With this fund raise, the bank’s capital adequacy is set to increase from 12.98 per cent in FY22 to over 15 per cent, giving it the much-needed capital to focus on its growth plans, including rolling out of new branches and products.
End of tussle
It is gathered from highly placed sources that the legal battle ongoing at Kerala High Court is between the promoter groups and the bank’s management (where the Reserve Bank of India) has also been dragged into, is likely to be withdrawn by both parties. The investors had moved the court to prevent the bank from appointing members to the board and lobbied that a few people seen close to the investors should be appointed to the board.
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The EGM notice only seeks a detailed discussion on the financial position of the bank concerning the third quarter“The investors are willing to withdraw this case against the bank and RBI and once they pull out of the case, the bank will also drop charges against these investors,” said a person aware of the matters. Apparently, the bank’s management has agreed that representatives of these key investors may take one or two board seats, provided the persons pass the fit and proper test of the RBI. “Investors have agreed to this,” adds the person cited above.
How the fight was resolved
Additional directors appointed by the RBI namely DK Kashyap and Jayakumar Yarasi and the senior supervisory manager (SSM) appointed by the RBI are said to have played an important role in resolving the logjam between the key investors and management of the bank. BusinessLine had reported on June 5 that both parties have a deadline of July 30 to sort out their differences and proceed with the rights issues.
“The fear of investors losing their hold on the bank just like what happened with Lakshmi Vilas Bank worked on them,” said another person aware of the matter. In November 2020, with LVB’s net worth depleted, the RBI placed the bank under restructuring, later to be handed out to Singapore’s Temasek-led DSB India Bank. The value of equity and bonds were fully written down resulting in shareholders and bondholders of LVB suffering losses on their investments.
Having invested in the bank for over two decades, Ravi Pillai and other key investors did not want to go through the LVB experience and hence have consented to withdraw their cases from the Kerala High Court. The key investor group, including Pillai will be seen participating in the right issues as well.
Factsheet
-- Rights issue of ₹127 crore due out by month-end or early August
-- Issue to be priced at ₹10-10.5 a share
-- Capital adequacy to increase from 12.93% in FY22 to over 15%
-- Logjam between management and shareholders resolved ahead of July 30 deadline
-- Key shareholders to participate in the rights issue
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