Lakshmi Vilas Bank “substantially completes” due diligence for proposed merger with Clix Group

Kolkata: Lakshmi Vilas Bank said it “substantially completed” the due diligence for its proposed merger with the Clix Group, even as the extended deadline for the completion of the process ended Tuesday, and said that the two parties would continue to discuss the future course of action. This leaves doubts on whether the fate of the deal still hangs in balance.

Two people close to the deal however told ET that the next step would be to hiring valuers. “We are investing our time in it because we are quite positive and confident about the deal,” one of the persons said. “There have been some procedural delays because of the disruptions caused by the Covid-19 pandemic,” he said.

“The mutual due diligence is substantially complete, and the parties are in discussions on the next steps,” the bank said in a regulatory filing to stock exchanges late Tuesday.

The due-diligence was carried out by E&Y and Deloitte. A market source said the bank has likely shortlisted three multinational accounting firms to carry out the valuation.

The capital-starved Lakshmi Vilas Bank signed a non-binding agreement with Clix Captial, a digital lending non-banking finance company that aimed to acquire a majority stake in the South-based private sector lender. The bank had signed a preliminary, non-binding letter of intent with Clix Capital Services Pvt Ltd, Clix Finance India Pvt Ltd, as on June 15.

The bank’s tier 1 capital ratio is turned negative (- 1.83%), limiting its ability to lend, as against the minimum requirement of 8.875%. Capital adequacy ratio is at 0.17% compared with the regulatory minimum of 10.875%.

Under the non-binding agreement, the proposed amalgamation is subject to completion of mutual due-diligence, regulatory and other customary approvals.As per the mutual understanding between parties, the exclusivity period was extended till September 15 due to prevailing pandemic situation, the bank said.The Reserve Bank of India last year had put Lakshmi Vilas Bank under prompt corrective action (PCA) citing high bad loans, insufficient capital among others.

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