Deadline for proposed Lakshmi Vilas Bank-Clix Capital merger due diligence extended till Sept 15

KOLKATA: Lakshmi Vilas Bank and non-bank lender Clix Capital, who have been exploring merger, have mutually decided to extend the deadline for completing the mutual due diligence till September 15. The previous deadline is expiring on Friday.

Auditors of the bank, meanwhile, have cast doubts on whether the bank can continue as a going concern if its merger talks with non-bank lender Clix Capital fails.

“There may be slight delay in the mutual due diligence and preparation of documents for regulatory requirements due to Covid situation and travel restrictions. Hence, both the parties mutually agreed to extend the exclusivity period till 15th September 2020,” the bank said on Thursday evening.

“Despite logistical challenges arising due to Covid-19 situation, we have made significant progress with the Clix group for the proposed amalgamation of Clix Capital Service Pvt Ltd and Clix Finance India Pvt Ltd into the bank,” the lender said.

The private sector lender has slipped into the red for the June quarter with Rs 112 crore loss after posting net profit for the March quarter.

The bank’s tier 1 capital ratio is at a 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 6.46% a year ago.

The bank reported only Rs 9 lakh operating profit for the quarter. In FY20, it had incurred a loss of Rs 836 crore.

“Based on their internal assessment and the likely capital infusion, the bank will be able to realise its assets and discharge its liabilities in its normal course of business and, hence, the financial results have been prepared on a going concern basis,” chartered accountants Chandrasekar LLP said in a report submitted to the bank’s board.

“The said assumption of going concern is dependent upon the bank’s ability to achieve improvements in liquidity, asset quality and solvency ratios, augment its capital base and mitigate the impact of Covid-19, and thus a material uncertainty exists that may cast a significant doubt on the bank’s ability to continue as a going concern,” the report said.

The bank, which has been under Reserve Bank of India‘s prompt corrective action since September last year, has seen a steady decline in its deposit base since then and rise in non-performing asset (NPA) ratios. Its deposit shrank 27% to Rs 21,161 crore at the end of June.

Its gross NPA ratio jumped to 25.4% at the end of June from 17.3% a year ago, with the net ratio deteriorating to 9.64% from 8.3% over the same period.

Earlier in the day, the bank’s shares had closed 2.48% higher on the BSE at Rs 20.70.

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