AION-Backed Lender Clix Capital Eyes Lakshmi Vilas Bank
Clix Capital, backed by former GE executives Pramod Bhasin, Anil Chawla and AION, has shown interest in Lakshmi Vilas Bank.
The Lakshmi Vilas Bank Ltd., a stressed old private sector bank, has found a second possible investor after a merger proposal with Indiabulls Housing Finance Ltd. was rejected in October.
In a notification to stock exchanges on Monday, Lakshmi Vilas Bank said it has received a preliminary non-binding letter of intent from Clix Capital Services and Clix Finance India Ltd. It was considered for “further processing” at the bank’s board meeting held on June 15.
“Under the non-binding LOI, the proposed transaction is subject to completion of due diligence, which the bank and the intending parties will be carrying out and will be subject to regulatory and other customary approvals,” the bank said.
According to a Business Standard report, Clix Capital is looking to invest Rs 1,400-1,500 crore for a 51% stake in the bank. BloombergQuint could not verify this independently.
Second Attempt At Revival
Lakshmi Vilas Bank has been under the Reserve Bank of India’s prompt corrective action framework due to high bad loans and inadequate capital since September 2019.
As of December, the bank had a gross non-performing assets ratio of over 23% and a net NPA ratio of 9.81%. Its capital adequacy ratio of 3.46% was well below the regulatory minimum. Earnings for the March-ended quarter are yet to be released.
The trouble at Lakshmi Vilas Bank has been building for sometime. As of the end of March 2019 quarter, the lender already had a weak capital adequacy ratio of 7.72%.
In April 2019, Indiabulls Housing Finance and Lakshmi Vilas Bank proposed a merger, saying that the amalgamated entity would create a large, healthy and diverse asset portfolio, which will benefit from stable low-cost funding in the form of public deposits and a wide distribution franchise.
In order to secure approval for the merger, the Indiabulls Group reduced its real estate exposure, which the regulator frowns upon and revised the terms of the deal mid-way. Still, the deal failed to secure RBI approval. In October, the bank informed exchanges that the regulator had rejected the deal.
The proposed transaction with Clix Capital is the second attempt at rescuing Lakshmi Vilas Bank.
Who Is Clix Capital?
Clix Capital Services Pvt. was formerly known as GE Money Financial Services Pvt. Ltd. and was incorporated in February 1994, according to a Care Ratings note on the company dated December 2019.
In March 2016, the GE group sold the business to former top executives Pramod Bhasin and Anil Chawla. The deal was backed by funding from PE firm AION Capital Partners Ltd. In September 2016, Clix Finance India Pvt. (formerly known as GE Capital Services India), became a 100% subsidiary of Clix Capital, according to Care Ratings.
The loan book of Clix Capital and Clix Finance mainly comprised corporate lending, healthcare equipment financing and auto lease loans as of 2016. Since then the business has been expanded to SME financing and consumer finance.
The assets under management of the two stood at Rs 4,754 crore as on September 2019, down from Rs 5,109 crore in March 2019, the rating note shows. AUMs grew significantly from Rs 1,415 crore in March 2017 to Rs 5,109 crore in March 2019.
The group has strong capital adequacy.
“The capital adequacy of the Clix Capital and Clix Finance has improved during H1 FY20 with reduction in debt levels owing to de-growth in loan book, accrual of profits and infusion of equity. Provisional capital adequacy ratio was 28.39% and 34.04% respectively for Clix Capital and Clix Finance, respectively, as on September 19 as against 21.21% and 29.90%, respectively, as on March 31, 2019,” said Care Ratings. The combined overall gearing of Clix Capital has also reduced from 3.4x as on March 2019 to 2.6x as on Sept. 30, 2019.