Lakshmi Vilas Bank looks to raise Rs 1,000 crore if merger deal goes awry

MUMBAI: Lakshmi Vilas Bank is preparing a Plan B just in case its merger plan with Indiabulls Housing Finance gets delayed.The lender is seeking investment of as much as Rs 1,000 crore from private equity funds in the event of a regulatory hitch.“Assuming that the merger would take some time to happen, we are talking to a few other investors with an intention of raising some capital,” said Lakshmi Vilas Bank (LVB) managing director Parthasarthi Mukherjee. “I am engaged with a variety of investors — my comfort level is to raise Rs 700- 1,000 crore.”The bank is looking to sell 4.99% each to three-four investors if the merger does not materialise or if Reserve Bank of India (RBI) approvals are delayed. According to RBI rules, investors can buy up to 5% equity in banks without its express approval. 69626547 The bank will also get Rs 188 crore from the preferential allotment made to Indiabulls Housing Finance, which gives the latter a 4.99% stake.If the RBI approves the plan, the merged entity will be among the top eight private banks in India by size and profitability. Indiabulls has a strong presence in northern and western Indian markets, while LVB has a strong presence in the south.Mukherjee said if the merger receives approval it could pave the way for further consolidation of this kind.“I have no inhibitions about the fact that this will be a landmark transaction, a relatively larger entity is merging into a small entity,” he said. “If that were to happen, it will open a window for similar transactions going forward.”The bank is going through a crunch phase as growth has slowed due to lack of capital. It reported a net loss of Rs 264 crore for the quarter ended March against a loss of Rs 373 crore in the year earlier.This year the bank is targeting recoveries of Rs 800-1,000 crore, which will reduce its gross non-performing assets (NPAs) by a third.FOCUS ON LOAN RECOVERYLVB will also focus on building a quality lending book, controlling expenditure and putting a large part of its manpower to work on expediting loan recovery.“The stress in the book has played itself out. Now we are focussing on recoveries,” Mukherjee said. “If all this goes as per plan we will turn profitable by year end.”

from Economic Times http://bit.ly/2Z3r1W5