Lakshmi Vilas Bank to raise around Rs 2000-cr via pref share sale; appoints JP Morgan

The Tamil Nadu-based mid-sized private sector lender Lakshmi Vilas Bank (LVB) is planning to raise around Rs 2,000 crore in fresh equity capital before the end of the current financial year, and has appointed JP Morgan Chase for advice on the process, a top official said Sunday.

The bank has also set a target of Rs 800 crore to Rs 1,000 crore through recoveries from defaulters. So far this fiscal, it has recovered around Rs 350 crore from defaulters.

It had mopped up around Rs 700 crore last November through qualified institutional placement to promoters.

The fresh fund raising plan through preferential allotment comes on the back of an expected uptick in credit growth for the bank, led by small scale units and retail demand, chief executive and managing director Parthasarathi Mukherjee told PTI over phone from Chennai.

"We are working on raising anywhere between Rs 1,500 crore and Rs 2,000 crore in fresh equity capital during this fiscal year. While the effort is on to get the money in by December, in any case it should be in before the end of the fiscal year as JP Morgan Chase, which is advising us, is already getting a good response," Mukherjee said.

The money will help the bank fund its growth which can clip around 20 per cent, he said.

Asked about news reports that the bank's promoters are planning to exit or cede management control by selling up to 51 per cent to strategic investors, he declined to comment.

Watch Zee Business video here:

However, I-banking sources told PTI that the bank already has held many rounds of discussions with global private equity leaders like Baring and Aion Capital, among others.

They also said the deal may be modelled after the Canadian NRI Prem Watsa of Fairfax Holdings' purchase of 51 per cent in the Thrissur-based Catholic Syrian Bank (in Kerala) that was concluded recently.

On asset quality, Mukherjee said the bank has been "witnessing a perceptible improvement in our assets quality moderation in stress in the lending book and as well as buoyancy in recoveries."

"We have already recovered around Rs 350 crore so far this fiscal and have set a target of mopping up Rs 800 crore to Rs 1,000 crore from defaulters by March," he said.

Last fiscal, the bank had added over Rs 2,915 crore in fresh bad loans, leaving it with a net loss of Rs 585 crore against a profit of Rs 256 crore in the previous fiscal year.

In the June quarter of this fiscal, its gross dud loans widened to 10.73 per cent from 3.78 per cent in June 2017, leading to a net loss of Rs 124 crore from a profit of Rs 66 crore a year earlier.

Asked about a massive fall in the bank stock last Friday, Mukherjee said it came as a surprise to him as nothing has changed negatively for the bank, and pointed to the massive sell-off in midcap stocks when the bank counter slumped 20 per cent to Rs 71.05 on the BSE.

In an exchange filing late Saturday on this, LVB said, "The bank has been consolidating its business significantly during the current financial year. During this year, asset quality slippages have considerably moderated and the bank has seen an impressive growth in low cost Casa balances. Overall, our funding has become a lot more granular in nature now."

"Our capital raising process, including induction of strategic investors, is proceeding as per plan and investment managers have seen good interest from high quality global investors so far. It is expected that the process will be completed well before the financial year-end," it said.

On other key metrics, Mukherjee said the bank's low- cost deposits Casa has grown by over 50 per cent in the past three years, since he took over, to 21 per cent of the total deposits. Higher Casa base helps a bank net higher margin.

He said the bank's liquidity condition is very good and he does not see any challenges going forward.

"There is credit demand now, thanks to SMEs and new retail borrowers. This has helped our asset base to change from 50 per cent of corporate book three years ago to 61 per cent now being non-corporate book. Today, corporate asset is only 39 per cent," he said.

Founded in 1926, the bank has a strong retail base in Tamil Nadu, apart from Kerala, Karnataka and Andhra with 567 branches.