Chennai, Nov 20 : The 563 branches of the Karur based 94-year old Lakshmi Vilas Bank (LVB) can get a valuation of Rs 5,630 crore, and there are about 970 ATM installations and a huge customer base (depositors and borrowers) which are to be properly valued, said a former Director of the bank and the grandson of one of the banks founders.
"LVB has about 20 lakh depositors and lakhs of borrowers. It has 563 branches, about 970 ATMs and about 4,000 staff. These are being offered to DBS Bank India free of cost on a platter. It took 94 years to build LVB to this level. All that DBS Bank has to do now is to change the name and command an extensive presence across the country at the cost of retail shareholders," said K. Ravindrakumar, former Director of LVB.
"It's really not easy to value the time and efforts; however, today every bank branch is valued at Rs 10 crore, applying which the value of the branch network of LVB will be Rs 5,630 crore," said Ravindrakumar, the grandson of K.P. Radhakrishna Chettiar, one of the founding members of LVB.
Pointing out the various immovable properties owned by LVB across the country, he said that they were funded by the shareholders and handing over all these to DBS Bank without the shareholders receiving anything amounted to betrayal of their trust in the regulator.
He said such a decision will erode the confidence of the people in equity culture. Many of the LVB shareholders have invested in the bank's equity about 100 years ago and have stayed on since.
Ravindrakumar said the RBI is adopting different standards for different banks. In the case of Yes Bank, the share capital was not written down but State Bank of India (SBI) was asked to pump in money. In LVB's case, the RBI is writing off the entire share capital.
Ravindrakumar and other shareholders have suggested to the RBI that DBS Bank can infuse fresh equity at a price that can be arrived at.
"Alternatively, you can go for a capital reduction and fresh investment of equity by the acquiring bank. A thorough valuation of the net worth of LVB should be done by a government recognised third party before any decision is arrived at," Ravindrakumar told the RBI.
Meanwhile, groups of individual shareholders of LVB held a meeting in Tamil Nadu's Karur on Friday, and in Trichy on Thursday.
They have decided to oppose the draft amalgamation scheme announced by the RBI.
On Tuesday, the RBI had announced its decision to amalgamate the LVB with the DBS Bank India.
As per the draft amalgamation scheme, 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.
Shareholders are also questioning why did the RBI not write to the market regulator to stop trading in LVB's shares from Wednesday onwards.
"If loss making companies are to be given free, then give Air India free to a foreign player. The proper manner for any sale is to call for a bid," LVB shareholders told IANS.
"The families of most of the shareholders who had attended the Trichy meeting are holding LVB shares for three generations. They are not stock traders," M.R. Subramanian, a shareholder and a former LVB employee, told IANS.
"The bank was built by the sweat and toil of every employee, including a peon. I know of a peon who had bought ordinary eraser for office use instead of costlier one as the purpose served is the same. There were chairmen who had avoided star hotel stays during their brief visits," Subramanian said.
"Without calling for any bid, the RBI has decided to hand over LVB free of cost to DBS Bank India. LVB is a listed bank and the RBI should have called for a bid as there were several interested parties," Annam Srinivas Reddy, a shareholder, told IANS from Warangal in Telangana.
Pointing out the merger talks with Clix group of companies, Reddy said that all of a sudden on Tuesday, the RBI came up with its amalgamation with DBS Bank India announcement, taking the shareholders by shock.
Reddy said he owns 70,000 shares bought at an average price of Rs 21 per share.
In their objections to the LVB-DBS Bank India amalgamation scheme proposed by the RBI, the group of shareholders said they were not part of the blunders committed by the board in the last few years or the unscrupulous top executives.
"Believing them, we subscribed innocently when material information were withheld in their offer document. We approached the SEBI, but the response was nil. Now it is being told that the capital and reserves of about Rs 6,000 crore have disappeared," they said.
According to the shareholders, non-performing assets (NPA) are not static and they may become standard assets when the economy revives.
"If it is performing asset, who will get the benefit? Is it fair to deprive us totally of the benefit," they asked the RBI.
The shareholders also asked the central bank whether the immovable assets of LVB been revalued at the current market rate.
"To establish a bank with 563 branches spread over 16 states and three Union Territories and 974 functional ATMs entails cost and value," the shareholders added in support of their argument to call for a proper bid from interested parties for LVB.
Another shareholder, Natarajan, in a mail to IANS wondered why didn't the RBI ask the market regulator and the stock exchanges to stop trading in LVB shares from Wednesday morning.
"If you have noticed, almost 45 lakh shares had changed hands on November 18 and 19 even though it fell 20 per cent each day. Now if the stock is worthless, who is still buying? Close to Rs 6 crore has been invested since the news was announced," he said.
The RBI has called for objections, suggestions about its draft LVB-DBS Bank India amalgamation scheme by Friday evening.
(Venkatachari Jagannathan can be contacted at firstname.lastname@example.org)