Lakshmi Vilas Bank Q2 net loss widens to Rs 397 crore as bad loans soar

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November 7, 2020 11:03 PM

The bank had posted a net loss of Rs 357.18 crore in the same quarter a year ago. Sequentially also, the loss widened against Rs 112.28 crore in the June quarter of this fiscal.

LVB, which has been put under Reserve Bank's Prompt Corrective Action (PCA) framework since September 2019 said it has an aggregate provision towards COVID-19 of Rs 20.26 crore.

Private sector Lakshmi Vilas Bank (LVB) on Saturday reported widening of its net loss at Rs 397 crore in the second quarter ended September 2020 due to rise in bad loans and provisions.

The bank had posted a net loss of Rs 357.18 crore in the same quarter a year ago. Sequentially also, the loss widened against Rs 112.28 crore in the June quarter of this fiscal.

Total income during the July-September period of FY 2020-21 fell by 26 per cent to Rs 494.58 crore as against Rs 665.33 crore a year ago.

Interest income fell to Rs 420.13 crore from Rs 607.33 crore, while income on investment was down at Rs 71.21 crore from Rs 146.88 crore, LVB said in a regulatory filing.

However, there was an increase in income from other sources at Rs 74.45 crore as against Rs 58 crore.

Bank’s asset quality deteriorated, as the gross non-performing assets (NPAs) moved up at 24.45 per cent of the gross advances by end of Q2 FY21 as against 21.25 per cent by end of September 2019. Sequentially, it improved from 25.40 per cent by the end of June 2020 quarter.

Gross NPAs were worth Rs 4,063.27 crore as of September 2020, as against Rs 4,091.05 crore by end of same month a year earlier.

On the other hand, net NPAs or bad loans showed improved at 7.01 per cent (accounting for Rs 946.72 crore) as against 10.47 per cent (Rs 1,772.67 crore).

Provisions for bad loans and contingencies were raised to Rs 391.34 crore for September quarter as against Rs 316.81 crore a year ago.

LVB, which has been put under Reserve Bank’s Prompt Corrective Action (PCA) framework since September 2019 said it has an aggregate provision towards COVID-19 of Rs 20.26 crore.

With regard to the dispute with the Religare group companies in a matter related to adjusting company’s deposit against loans, it said the bank is defending the case.

The cash-strapped bank, which is engaged with Gurgaon-based Clix group for a merger to bring in much required capital, had started seeing troubles after it shifted its focus to lend to large businesses from SMEs.

Its loans to the investment arms of Malvinder Singh and Shivinder Singh, former promoters of pharma major Ranbaxy and Fortis Healthcare, against fixed deposits (FDs) of Rs 794 crore made with the bank in late 2016 and early 2017 turned the bank turtle.

In 2017-18, the bank had adjusted deposit loans aggregating to Rs 794 crore, extended to RHC Holding Pvt Ltd and Ranchem Pvt Ltd, group companies of Religare Finvest against its deposits.

However, disputing the said adjustment, Religare Finvest filed a suit against the bank in May 2018 in the Delhi High Court.

“The matter still remains sub-judice. The Reserve Bank of India advised that the bank may on a prudential basis maintain provision to cover potential losses for the ‘claims against the bank not acknowledged as debt’. As per independent legal opinions received by the bank, the adjustment of deposits against loans is lawful and tenable,” LVB said.

The south-based lender said it has held a contingent provision of Rs 200 crore on this score which is not included in tier I/II capital nor for the PCR (provision coverage ratio).

“Further the bank has submitted replies to the clarifications sought by Sebi/EOW/SFIO/ED. EOW Delhi has registered FIR against the then board of directors and a few employees of LVB and held enquiries with some of them. The bank has assured to extend full co-operation in the investigation,” it said further.

Notably, the shareholders of the bank in the AGM held on September 25 had voted out seven members from the board, including the then MD and CEO S Sundar.

The RBI on September 27 appointed the CoD composed of three independent directors Meeta Makhan, Shakti Sinha, and Satish Kumar Kalra, being headed by Meeta Makhan.

On the capital raise plan, LVB said, “Despite logistical challenges arising due to COVID-19 situation, we have made significant progress with Clix group for the proposed amalgamation of Clix Capital Service Pvt Ltd and Clix Finance India Pvt Ltd into the bank.”

There were minor incremental due diligence requested by Clix Group, which was completed this week. Now, the respective sides are in the process of a workable and mutually acceptable framework.

Further, the bank’s board has approved the issue by equity shares up to Rs 500 crore by way of rights issue and ICICI Securities is appointed as the merchant banker for the issue, it said.

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