Individual shareholders of Lakshmi Vilas Bank (LVB) are betting their hopes on institutional shareholders to secure some value for their hard earned investment in the bank stock. There are about 97,245 individual shareholders in LVB holding 46.73 per cent stake in LVB apart from the institutional holders.
On Tuesday, the RBI announced its decision to amalgamate the LVB with the DBS Bank India. As per the draft amalgamation scheme, the RBI has said on and from the appointed date, the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank (LVB), shall stand written off.
On and from the appointed date, the transferor bank shall cease to exist by operation of the scheme, and its shares or debentures listed in any stock exchange shall stand delisted without any further action from the transferor bank, transferee bank (DBS Bank India) or order from any authority.
"I have 4,000 shares in LVB for the past 10 years and with an original investment of Rs 3.6 lacs including last rights issue at Rs.122 per share. Now what will be the state of my invested amount?" wondered a shareholder.
"Is RBI taking a revenge on the LVB shareholders for voting out directors and also its CEO at the annual general meeting? The employees, creditors are all saved and only the shareholders are made a scape goat," A.Narayanan, a shareholder told IANS.
"I had bought 300 shares at Rs 16 about six months back. In all mergers and amalgamations, there will always be a share swap. But here, the RBI has proposed to write-off paid-up share capital, reserves and surplus including the balances in the share/securities premium account of LVB," he said.
He said the institutional shareholders like Life Insurance Corporation of India (LIC) and others should take it up on behalf of all shareholders so that they are not short-changed
Individual shareholders are of the view that with just change of name board from Lakshmi Vilas Bank to DBS Bank India, the latter will add about 563 branches to its fold with readymade employees.
It took 94-years for LVB to grow its branch network to this level and it may take lot of money and efforts on the part of DBS Bank India to have such a wide network.
Analysts have said the deal will be beneficial for DBS Bank India as it can expand its footprint.
"LVB will significantly expand DBIL's (DBS Bank India Ltd) footprint in India. As of Sept. 30, 2020, LVB had 563 branches, compared with DBIL's 27. The merger could provide a DBIL with meaningful physical presence, which we believe is needed to complement the digital strategy the bank is already pursuing in India. LVB will also help DBS penetrate deeper into southern parts of India," S&P Global Ratings said on Thursday.
"LVB's network is focused in south India, with three-quarters of its branches located in three states - Tamil Nadu, Andhra Pradesh and Karnataka. We regard LVB's branches as one of its most coveted residual assets for a foreign buyer and believe the ready-made platform that will enable deeper market penetration is the key draw for DBS," Fitch Ratings said on Thursday.
"As a shareholder I am losing my investment fully. Perhaps the institutional investors will take it up so that they can secure their investment along with individual shareholders," R. Subramanian, a LVB shareholder told IANS.
It is not only ordinary mortal shareholders who will be losing their money but even the Lord Venkataramana Swamy at Thanthonimalai being the first shareholder, will be the first loser in the RBI proposed deal.
"The shareholder folio number 1 is in the name of the Lord Venkataramana Swamy the presiding deity at the famed temple in Thanthonimalai (in Tamil Thanthondrimalai -- mountain that appeared on its own)," K.R.Pradeep one of the promoters of LVB told IANS.
(Venkatachari Jagannathan can be contacted at firstname.lastname@example.org)