Clix Capital seeks merger with LVB, offering Rs 1,900 cr capital boost

The proposal from Clix Group seek an all-stock deal and a merger with the bank which will lead to the NBFC picking up at least 49 per cent in the Chennai-based bank which has been looking for immediate growth capital since last October when the Reserve Bank turned down a merger proposal with Indiabulls Finance. The bank's board met on Monday to consider the non-binding proposal from Clix Group received on June 12.

Mid-size private sector lender Lakshmi Vilas Bank has received a preliminary proposal from the Aion Capital-backed non-banking lender Clix Capital for a merger that will augment the Chennai-based lender's capital base by around Rs 1,900 crore. The lender in an exchange filing said that it has entered into a non-binding letter of intent with Clix Capital Services Pvt Ltd and Clix Finance India (collectively, the Clix Group) on Monday in relation to the proposed amalgamation of Clix Group with the bank.

Aeon Capital, which is promoted by ICICI Ventures and Apollo Global Management, owns 85 per cent stake in Clix Capital Services and Clix Finance India. These two companies were launched by former GE Capital honchos Pramod Bhasin and Anil Chawla. The proposal from Clix Group seek an all-stock deal and a merger with the bank which will lead to the NBFC picking up at least 49 per cent in the Chennai-based bank which has been looking for immediate growth capital since last October when the Reserve Bank turned down a merger proposal with Indiabulls Finance.

The bank's board met on Monday to consider the non-binding proposal from Clix Group received on June 12. "Under the non-binding LoI, the proposed amalgamation is subject to completion of mutual due-diligence in exclusive window of 45 days, and will be subject to regulatory and other customary approvals," the lender said after the board meeting.

"In the event, the discussions between the contracting parties in relation to the proposed transaction are successful and definitive agreements are executed, we will make appropriate disclosures as required under the provisions of applicable law," the bank said. "Clix Capital Services & Clix Finance India are keen to merge with the bank, resulting in a capital infusion of over Rs 1,900 crore. If the merger goes through, Clix Capital will own up to 49 per cent in LVB," a source in the know of the details told PTI after the board meeting.

An email seeking inputs sent to the bank did not elicit a response immediately, while the bank's chief executive S Sundar could not be reached over the phone. It is learnt that the city-based investment bank Centrum Capital is the sole advisor to the deal.

"LVB has a received preliminary, non-binding letter of intent from Clix Capital Services and Clix Finance India dated June 12, which the board of directors of the bank has considered for further processing in their meeting held on June 15," the bank said in a filing to exchanges earlier in the day. Nearly a century-old LVB has been in news ever since its core capital went down the regulatory minimum level and was placed under the prompt corrective action plan by the Reserve Bank in September 2018.

There were reports of the Singaporean lender DBS and the Singaporean sovereign wealth fund Temasek Holdings, as also private equity fund Capri Global evincing interest in picking up controlling stake in the bank earlier this year. In April 2019, the bank had entered into an exclusive agreement with the second-largest pure-play mortgage player Indiabulls Finance for an amalgamation but come October, the Reserve Bank threw out the proposal citing regulatory concerns over the suitor's heavy exposure to realty.

After this, the bank started looking for new investors. If the LVB-Clix Capital deal goes through, it will be the second instance of an investor taking a majority stake in a private bank beyond the current permissible limit of 26 per cent, after Canadian NRI investor Prem Watsa's Fairfax Holdings acquired a 51 per cent stake in CSB (ex-Catholic Syrian Bank) for about Rs 1,200 crore in 2018.

Under the non-binding proposal, the proposed transaction is subject to completion of due diligence, which the lender and the intending parties will carry out. Clix Capital and Clix Finance are into consumer finance, had a loan book of around Rs 4,600 crore and a net worth of around Rs 1,900 crore, which on merger would become the equity capital of LVB which has negative net worth now.

The NBFCs are likely to begin due diligence next week and within two-four weeks from then will make a formal application to the RBI. The LVB counter rallied 4.94 per cent to close Rs 15.30 on the BSE, whose benchmark Sensex plunged 1.63 per cent on the global selloff.