Recently about 60 per cent of the shareholders voted against the appointment of MD & CEO and six directors, including promoter K R Pradeep, following which RBI appointed a committee to manage the bank's day-to-day affairs.
A senior official from one of the institutional investors which holds less than 5 per cent stake in the bank confirmed the development and requested anonymity.
Sources said that while LVB will pursue the merger plan with Clix Capital, the proposed right issue is aimed at increasing the capital adequacy ratio (CAR).
As of June, LVB's Basel-III compliant CAR slumped to 0.17 per cent from 1.12 per cent in the previous quarter. The bank's tier-1 capital ratio turned negative and worsened sequentially to (-)1.83 per cent in April-June from (-)0.88 per cent, compared with the minimum requirement of 8.875 per cent.
At the bank's AGM, its shareholders approved a resolution authorising it to undertake capital raising as FPO, Rights issue, QIP or other available routes to raise capital. LVB was unsure about the response to a QIP in the current circumstances, and therefore decided to explore the rights issue route.
If there is capital infusion of about Rs 1,200 crore, then the operating profit in three years will be about Rs 100 crore, said an official.
The lender’s only shot at survival is an investor putting in a large chunk of capital.
The bank's attempt to find ann investor in Indiabulls Housing Finance
was rejected by RBI. The regulator did not give reasons for denying permission.