Lakshmi Vilas Bank shares may soon go to zero; RBI’s resurrection plan wipes out equity shareholders

By: |
Updated: Nov 18, 2020 2:05 PM

Lakshmi Vilas Bank Share: The total paid-up share capital of the troubled Lakshmi Vilas Bank is likely to be written-off as the merger with DBS Bank India goes ahead.

Lakshmi Vilas Bank, rights issue, board meeting, Indian bankingShares of Lakshmi Vilas Bank closed at Rs 15.60 per share on Tuesday. The stock has tanked over 35% since the end of June this year.

Lakshmi Vilas Bank Share Price: The total paid-up share capital of the troubled Lakshmi Vilas Bank is likely to be written-off as the merger with DBS Bank India goes ahead. The Reserve Bank of India (RBI) in the draft scheme of amalgamation has said that the shares or dentures of the Lakshmi Vilas Bank, listed in any stock exchange shall stand delisted upon the merger. “On and from the Appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank, shall stand written off,” the draft scheme said. Shares of Lakshmi Vilas Bank hit the lower circuit as they tanked 20% on Wednesday morning to trade at Rs 12.4 per share.

Lakshmi Vilas Bank has seen a decline in its operation performance for the last three years. The South India-based bank has been operating with a negative CAR of 2.9% due to huge NPAs and without a CEO after shareholders ousted the caretaker CEO recently. “As per the extant scheme, paid-up capital/reserves of LVB shall stand extinguished similar to w-off of AT 1 bonds in the case of Yes Bank. Deposits will be transferred to DBS and thus stand fully secured, while employees will be moved to the transferee bank at the same remuneration as in LVB for the next three years,” said brokerage and research firm Emkay Global in a note.

Shares of Lakshmi Vilas Bank closed at Rs 15.60 per share on Tuesday. The stock has tanked over 35% since the end of June this year. The central bank said that Lakshmi Vilas Bank has not been able to raise adequate capital to address issues around its negative net-worth and continuing losses while experiencing the continuous withdrawal of deposits and low levels of liquidity.

Analysts at Emkay Global see the merger as a positive for DBS Bank India. “In our view, the merger of LVB (563 branches) with DBS Bank (33 branches), which is trying to expand its base in India, will be a long-term positive for the latter, while putting to rest concerns around a potential merger with a healthy large private bank as it has been the case in the past,” they added.  The extinguishment of capital/reserves and merger with an unlisted bank will be negative for minority investors in Lakshmi Vilas Bank.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1CPSEs: Centre for m-cap, asset monetisation goals in MoUs
2Analyst Corner: Laurus Labs’ strength is adding new revenue streams
3Analyst Corner: Maintain ‘buy’ on Tata Power with increased TP of Rs 73