Clix Capital eyes 51% stake of LVB

Lakshmi Vilas Bank (LVB), the private sector lenders desperate fund infusion need will soon be met.

In a statement to the exchanges it informed of having received a preliminary, nonbinding letter of intent (LoI) from AION Capital-backed Clix Capital Services and Clix Finance India for a proposed capital-raising transaction.

The lender and the intending parties will be carrying out due diligence. It will make “appropriate disclosures as required under the provisions of applicable law” in the event of the execution of definitive agreements.

The proposed transaction would be subject to regulatory and other customary approvals.

Private equity player AION Capital, through the two non-banking financial units, is set to lead the deal as it looks to buy over a 51% stake for Rs 1,400-1,600 crore.

AION Capital is ready to take up to 74% by roping in another investor. Besides, some existing investors may pump in equity into the bank to retain their stakes at current levels, taking the entire amount of capital infusion to around Rs 3,000 crore.

If the transaction fructifies, it would be the second deal in which an investor takes a majority stake in a private sector bank beyond the permissible limit of 26%.

In 2018, Fairfax Financial Holdings had acquired a 51% in CSB for around Rs 1,200 crore. This was also the first stake sale of an Indian bank to a foreign non-banking entity since the RBI tweaked ownership norms in May 2017.

According to norms set by the banking regulator, investors will have to seek RBI’s approval if any transaction leads to the purchase of more than a 5% stake in a bank. The new shareholders and directors will also have to meet the so-called ‘fit and proper’ criteria laid down by the regulator.

In October 2019, the RBI had refused to give nod for the amalgamation of Indiabulls Housing Finance and its subsidiary with LVB. Since then, the bank has been looking for new investors.

Net net we understand that this development has undoubtedly created investor and trader interest in the LVB stock as change in management would act as a key trigger in the near term.

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