InvestorQ : Why did the shares of Lakshmi Vilas Bank surge on Friday 03 of July?
indhumathi Sayani made post

Why did the shares of Lakshmi Vilas Bank surge on Friday 03 of July?

shrinidhi Rajan answered.
11 months ago

Lakshmi Vilas Bank was up 5% on Friday after reports appeared in sections of the media that the Singapore-based private equity player Clermont Group was in talks to invest in LVB. Clermont was looking to pick up a sizable stake and the whole advantage of the infusion would be that the capital adequacy would go up from 3.45% to over 8%.

Clermont is apparently looking to invest $150-200 million in exchange for up to 20% stake in LVB. This capital infusion will be critical for LVB ahead of the proposed merger with Clix. This should provide the much needed lifeline for LVB to stay afloat till the merger with Clix is approved by the RBI. The entire approval process could take up to 1 year.

Clix capital is backed by AION Capital and it has already given a non-binding letter to LVB expressing its interest in a full-fledged merger. Clix looks to buy in excess of 51% stake in LVB for approximately around Rs.1600 crore. The parent of Clix, AION, is also willing to extend its stake up to 74%. This should be the only hope for LVB to survive in the long run.

On needs to quickly look back at the history of this deal. Back in October 2019, RBI had refused to grant approval for the proposed merger of Indiabulls Housing Finance with LVB as it would have given a backdoor entry for IBHF into the banking space. Then, IBHF had its own share of problems with the regulators with respect to its balance sheet.