Lakshmi Vilas Bank under Moratorium - Angel Broking

Mr. Jaikishan Parmar - Sr. Equity Research Analyst, Angel Broking Ltd

Reserve bank of India has put Lakshmi Vilas Bank (LVB) under a moratorium and capped deposit withdrawals by customers to Rs 25,000. The RBI did provide ample time to the management of LVB to draw an appropriate plan for revival, however, no concrete plan was fructified. Hence, RBI proposed to merge the ailing bank with the local unit of Singapore's DBS Banks. Recently LVB was intalk with Clix capital but that also did not materialise. So finally after looking at continuous withdrawal of deposits, erosion of net worth, and escalation asset quality issues RBI took the right step to prevent interest of depositor and financials market. We believe a merger would be beneficial for DBS bank as it would be able to grow business in the south that has business and individual route to Singapore. As of Q1FY21 DBS CRAR stands at 15.99% and GNPA and NNPA at 2.7% and 0.5%, respectively. DBS is ready to put fresh capital to initiate new business.

In this merger shareholder of LVB will not get any benefit, The entire capital of the bank will be written off post the merger with DBS Bank India Ltd (DBIL). compression in loan book impacted NII and other income which weakened pre-provision profit and continues deterioration of asset quality issue kept provision cost high for the last several quarters and these combinations led to losses. consequently, net worth got eroded and CRAR went way below regulatory requirement.

Shares of LAKSHMI VILAS BANK LTD. was last trading in BSE at Rs.15.5 as compared to the previous close of Rs. 15.65. The total number of shares traded during the day was 196940 in over 489 trades.

The stock hit an intraday high of Rs. 16.1 and intraday low of 15.35. The net turnover during the day was Rs. 3059425.

Source : Equity Bulls

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