By Venkatachari Jagannathan
Chennai, Nov 20 | Advocating a proper valuation of the Lakshmi Vilas Bank (LVB), one of its promoters said that Singapore-based DBS Bank was willing to acquire 50 per cent stake in the 94-year-old Karur-based lender in 2018 at over Rs 100 per share. He said the RBI should have called for bids from interested parties.
The Reserve Bank of India (RBI) is now offering the 563 branches (many branches, head office, corporate office-owned building) LVB and other real estate free of cost to DBS Bank India Ltd, a subsidiary of the DBS Bank, Singapore.
“In 2018, we had appointed JP Morgan for the LVB’s capital raising programme. At that point in time, all the financial ratios were positive for the bank. All the provisions made then were also known to the RBI and others,” K.R. Pradeep, one of the LVB promoters, told IANS.
According to Pradeep, about 15 large investors showed interest to invest in the LVB.
“DBS Bank and JP Morgan met RBI officials. DBS Bank said it was willing to acquire 50 per cent stake in LVB and the investment will be about Rs 3,500 crore,” Pradeep said.
“However, the RBI said DBS has to dilute its stakes to 15 per cent in 10 years but the DBS Bank was not agreeable; the deal process did not progress further,” he added.
K. Ravindrakumar, a former Director and the grandson of K.P. Radhakrishna Chettiar, one of the founding members of the LVB, told IANS: “Today every bank branch is valued at Rs 10 crore, applying which the value of the branch network of LVB will be Rs 5,630 crore.”
According to Ravindrakumar, other than the Rs 368 crore bond, there is no major liability for the LVB.
Pradeep said: “Logically, the RBI should have called for bids from interested parties. Or, if it wanted to give the LVB to only DBS Bank India, it could have asked it to talk with the former to give their valuation.”
“If loss-making units are to be palmed off for free, then Air India, power utilities, state transport corporations, and other public sector undertakings could also be given free to the interested parties,” he said.
On Tuesday, the RBI announced its decision to amalgamate the LVB with the DBS Bank India.
As per the draft amalgamation scheme, the RBI has said that on and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in share/securities premium account of the transferor bank (LVB), shall stand written off.
On and from the appointed date, the transferor bank shall cease to exist by operation of the scheme, and its shares or debentures listed in any stock exchange shall stand delisted without any further action from the transferor bank, transferee bank (DBS Bank India) or order from any authority.
According to Pradeep, the LVB owns its corporate office in Chennai, the head office in Karur, several branches and residential apartments in several cities, including Mumbai and land parcels.
“We have built strong rooms in over 100 branches. As a result, we can do gold loan business safely to the tune of Rs 20,000 crore. Many non-banking finance companies (NBFC) do not have proper strong rooms,” he added.
According to him, the immovable assets easily would be valued at about Rs 400 crore.
“The bank’s net worth is not in negative. Further, the written-off loans will be about Rs 600 crore and even if 25 per cent of that are recovered, it is a bumper bonus for the buyer,” Pradeep said.
“There is a strong case of valuing the bank in a proper manner. With its decision to give the LVB free of cost to the DBS Bank India, all private entities are at risk now,” he remarked.
(Venkatachari Jagannathan can be contacted at firstname.lastname@example.org)