Irate Lakshmi Vilas Bank shareholders seek fair value for bank

CHENNAI: Individual shareholders of Lakshmi Vilas Bank (LVB) are objecting to the RBI’s merger proposal of the bank with DBS Bank India. They point out that, when the bank needed it, they contributed capital and must now have the benefit of an upside when it turns around. The shareholders have sharply criticised the merger proposal, alleging lack of transparency in the entire process.
“LVB has been given away on a platter to DBS, based on the book value. Unlike other banks where branches are leased, 150 branches of LVB (out of over 450) are in their own premises. There are 60 apartments (staff quarters in Mumbai alone) and 11 acres of prime property in Karur. Valuing these at book value is not transparency. A reduction in share value or capital and leaving something for the shareholders on the table is the correct approach. We have sent our views to the RBI,” said M A A Annamalai, of Akshya & Co, who holds over 30,000 shares of the bank.
“We believe the valuation has been done based on the book value, there is no information on how it was arrived at. The best part is, the auditors who valued these assets on LVB’s books were ousted when they sought reappointment in last AGM, showing shareholder distrust,” M Murugan, another shareholder, alleged.
More than 60 individual shareholders of LVB met in Trichy district on Thursday to sign a letter of objection addressed to the RBI. The letter said that the amalgamation process failed to value the existing goodwill and properties of the bank and devalued existing share value to zero. They added equity shareholders had to take the hit as per legal norms.
Annamalai’s petition said, “It is difficult to comprehend RBI’s different yardsticks for the resolution process of different stressed banks. As the bank is extremely stressed and not performing, a capital reduction like in the case of Yes Bank would have been an appropriate resolution.”
In the case of Yes Bank, the share capital was not completely written down, unlike in the case of LVB. While AT1 bonds were completely written down, whereas it was not written down for LVB. A former LVB employee and shareholder-cum-depositor M R Subramanian asked, “Is it fair to throw all the purported loss on the small shareholders who had been with the bank all these years?” Others felt the effort of bringing in foreign capital for LVB should not be at the cost of 96,380 retail domestic investors who constitute nearly 24% of equity holders.
Domestic insurance companies hold about 6.4% of the bank’s equity. The Karur-based bank was started to address the financial needs of farmers, artisans, weavers, and small traders, when no bank was interested in financing these micro sectors or the mercantile community, helping them from the clutch of money lenders and indigenous bankers.