Lakshmi Vilas Bank Shares hit 20 percent lower circuit on the NSE at Rs 12.45 on Wednesday. Investors remained worried that if the amalgamation with DBS Bank India goes through, the shares would be delisted.
In fact, the scheme of amalgamation reads, "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, shall stand written off. (2) 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 or order from any authority."
The Reserve Bank of India has now placed in public domain a draft scheme of amalgamation of Lakshmi Vilas Bank with DBS Bank India Ltd. (DBIL).
DBIL is a wholly owned subsidiary of DBS Bank Ltd, Singapore ("DBS"), which in turn is a subsidiary of Asia's leading financial services group, DBS Group Holdings Limited and has the advantage of a strong parentage.
DBIL has a healthy balance sheet, with strong capital support. As on June 30, 2020, its total Capital was Rs 7,109 crore (against Capital of Rs 7,023 crore as on March 31, 2020). As on June 30, 2020, its GNPAs and NNPAs were low at 2.7% and 0.5% respectively; Capital to Risk Weighted Assets Ratio (CRAR) was comfortable at 15.99% (against requirement of 9%); and Common Equity Tier-1 (CET-1) capital at 12.84% was well above the requirement of 5.5%. Although the DBIL is well capitalised, it will bring in additional capital of Rs 2500 crore upfront, to support credit growth of the merged entity. Owing to comfortable level of capital, the combined balance sheet of DBIL would remain healthy after the proposed amalgamation, with CRAR at 12.51% and CET-1 capital at 9.61%, without taking into account the infusion of additional capital.