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AION joins the race to buy up to 30% in LVB

The bank plans to dilute stake between 26-30 per cent and has hired JP Morgan to run the process.

Last Updated: Sep 18, 2018, 09.46 AM IST
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In November 2017, Lakshmi Vilas raised Rupees 800 crore through a rights issue of shares.
MUMBAI: AION Capital Partners, the joint venture between global PE fund Apollo Global and domestic fund ICICI Venture, has joined the race to acquire a significant minority stake in Lakshmi Vilas Bank (LVB), according to two people aware of the development.

A clutch of private equity investors, including Blackstone, Carlyle and True North, and strategic investors such as DBS are engaged in an initial discussion to acquire a stake in LVB.

The bank plans to dilute stake between 26-30 per cent and has hired JP Morgan to run the process.

The 92-year-old bank will consider various strategic options after the private-sector lender’s board ratified the proposal and engaged in initial discussions with foreign banks and private equity funds, ET reported in May.

An AION spokesperson declined to comment.

“We have met investors including AION, Blackstone in the past for stake sale,” said Parthasarthi Mukherjee MD Lakshmi Vilas Bank. “The process is run by JP Morgan and we expect to close the deal by year end.”

In November 2017, Lakshmi Vilas raised Rupees 800 crore through a rights issue of shares. The promoters of LVB hold 9 per cent while public shareholders — including foreign portfolio investors and financial institutions — hold the remaining 91 per cent.

LVB has a strong base in Tamil Nadu and a significant presence in Kerala, Karnataka and Andhra Pradesh and as on June 30, 2018, the bank has 567 branches and 1,039 ATMs. Its focus areas is the retail, mid-market and corporate space. It has a strong deposit book of Rupees 32,473.26 crore.

The bank’s non-performing loans had shot up in the past one year and is at 9.8 per cent at the end of March 2018. The bank saw Rupees 2,916 crore of additions of bad loans during last fiscal year. It has market capitalisation of Rupees 2,386 crore.

The company is also looking to raise capital through qualified institutional investors or preferential allotment. This capital will be used to fund the growth and increase capital adequacy ratio which has fallen to less than 10 per cent. With bad assets cleaned from its book, the bank wants to increase its market share. The bank’s gross advances was at Rupees 27,000 crore.

LVB had a loss of Rupees 584.87 crore in FY18 against a profit of Rupees 256 crore in the previous year. Gross non-performing assets (NPAs) stood at Rupees 2,694 crore in the last financial year compared with Rupees 489 crore in the year earlier. In percentage terms, it rose to 9.98 per cent from 2.67 per cent.

AION, a JV between global PE fund Apollo Management and ICICI Venture, was one among the contenders to acquire stake in Catholic Syrian Bank, which got acquired later by Prem Watsa-owned Fairfax India Holdings in February this year.

AION Capital had raised its maiden fund in 2014 at $825 million and invested in. Avantha Group, Ballarpur Industries Ltd, PlanetCast Media Services (formerly Essel Shyam Communications), electrical appliances maker Crompton Greaves. In 2016, AION had acquired the commercial lending and leasing business of GE Capital in India by joining hands with former senior GE Capital executives Pramod Bhasin and Anil Chawla.

A consortium of JSW Steel and AION Investments had acquired Monnet Ispat & Energy Ltd for 2,875 crore this month as per the the resolution plan approved by the National Company Law Tribunal.

The total PE/VC investment in the banking sector during the period 2015-first half of 2018 amounts to $2.9 billion, with $1.9 billion coming in 2017, according to a recent report by EY-IVCA (Indian PE & VC Association).

The top deals include $795-million investment in Axis Bank Ltd by Bain Capital in 2017; $387-million deal with Kotak Mahindra Bank by CPPIB, CDPQ; $259-million investment in RBL Bank by a clutch of investors such as CDC Group, ABG Capital and Multiple PE; $176 million in Bandhan Bank by IFC, GIC and SIDBI and $147-million ddeal by Temasek in AU Small Finance Bank in 2018.

“Year 2017 was the year when banks began to show signs of recovery and this was especially seen in the case of the larger private sector banks. The sector saw a high average deal value of $105 million during this period,” the EY report added.

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