DBS wanted 50% stake in LVB in 2018, didn't get RBI nod

DBS wanted to buy 50% stake in LVB in 2018, RBI did not agree: Report

The deal didn't go through as DBS was unwilling to ply with the stake dilution norms applicable to private bank promoters

On November 17, the RBI imposed a one-month moratorium on the private-sector lender after putting tit under prompt corrective action (PCA, or under watch by the central bank) in September 2019. Credit: PTI Photo

DBS Bank, now chosen by the Reserve Bank of India (RBI) to bail out crisis-laden Lakshmi Vilas Bank (LVB), had in 2018 wanted to acquire a 50 per cent stake in the same bank, a promoter with the bank told Moneycontrol.

The Tamil Nadu-based private sector lender had planned to raise around Rs 2,000 crore in fresh equity capital in 2020, and had appointed JP Morgan Chase for this fundraising programme. "That time, DBS approached JP Morgan for a strategic stake buy of up to 50 per cent stake in LVB and was offering above Rs 100 per share. They wanted to control the bank and consolidate in the global balance sheet," the promoter, K R Pradeep, told the publication.

Read | Lakshmi Vilas Bank investors seek to challenge merger with DBS Bank: Report

However, the deal didn't go through as DBS was unwilling to ply with the stake dilution norms applicable to private bank promoters, as the RBI would have wanted it to. The RBI maintained that the dilution should happen in promoter's stake but DBS wanted to retain the controlling stake, Pradeep said.

The promoter added that there is a big valuation gap

“So, they wanted to acquire the bank for at least Rs 100 per share at one point. And now, the entire bank has been handed over by the RBI to DBS free-of-cost,” the promoter said.

"There is a big valuation gap here," said Pradeep. "DBS has a capital base of Rs 7,500 crore and a deposit book of Rs 25,000 crore. They are getting an equal amount deposit book from LVB for zero capital. This makes a compelling case for a proper valuation," said Pradeep.

Read | RBI's swift resolution of Lakshmi Vilas Bank to maintain sector stability, says S&P

On November 17, the RBI imposed a one-month moratorium on the private-sector lender after putting it under prompt corrective action (PCA, or under watch by the central bank) in September 2019. It is the only non-government-owned bank under the PCA.

The RBI also formulated a scheme of amalgamation to merge Lakshmi Vilas Bank (LVB) with DBS Bank India Ltd (DBIL). Under this, Singapore's DBS will infuse Rs 2,500 crore into DBS Bank India for the proposed merger.

(With inputs from agencies)