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AION-backed Clix Capital eyes troubled Lakshmi Vilas Bank
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Clix Capital, a non-bank lender controlled by private equity firm AION Capital, has shown preliminary interest to acquire cash-starved Lakshmi Vilas Bank.

The private-sector bank said in a stock-exchange filing that it has signed a non-binding letter of intent for a "proposed amalgamation" with Clix Capital.

The bank said the proposed merger will be subject to completion of due diligence within 45 days and regulatory approvals. It didn’t specify any financial details.

This is the second attempt by Lakshmi Vilas Bank to find an investor to rescue itself. The bank has been on the lookout for a buyer for over two years due to lack of capital and weak financials.

In April last year, Lakshmi Vilas Bank and Indiabulls Housing Finance Ltd had agreed to an all-stock merger.

However, the Reserve Bank of India in September 2019 imposed lending curbs on the bank due to high bad loans, lack of sufficient capital to manage risks and a negative return on assets for two consecutive years. A month later, the RBI rejected https://www.vccircle.com/rbi-blocks-merger-of-lakshmi-vilas-bank-with-indiabulls-housing the bank’s merger with Indiabulls Housing.

The bank is also being investigated by police for alleged misappropriation of funds by its directors.

Lakshmi Vilas Bank saw a top-level shuffle last year with Parthasarathi Mukherjee, who was at the helm since 2015, quitting as the CEO in August 2019. In January this year, Subramanian Sundar took charge as the interim CEO till April-end. His tenure was later extended till May-end and then until November.

Weak financials

Lakshmi Vilas Bank made a net loss of Rs 334.5 crore in the October-December quarter of 2019-20, compared with a loss of Rs 456.5 crore a year earlier.

As of December, the bank’s gross non-performing assets were over 23% of total loans while net NPAs were 9.81%. Its capital adequacy ratio had declined to 3.46% from 7.57% a year earlier. This was well below the regulatory minimum requirement of 8%. The financial results for the January to March quarter are yet to be released.

Clix Capital

Clix Capital was set up in early 2017 when AION Capital backed Pramod Bhasin and Anil Chawla, former top executives at GE India, to acquire the American conglomerate’s Indian commercial finance business.

AION Capital is a partnership between New York-based Apollo Global Management and ICICI Venture, which was called off https://www.vccircle.com/icici-venture-apollo-global-to-end-joint-venture-aion-capital/ last week.

The Clix Capital group comprises non-banking finance companies Clix Capital Services and Clix Finance India as well as mortgage lender Clix Housing Finance Pvt. Ltd.

Clix Capital’s total assets under management (AUM) stood at Rs 4,754 crore as on September 2019, falling from Rs 5,109 crore in March 2019. This was due mainly to a slowdown in disbursements prompted by a liquidity crunch faced by non-bank lenders and mortgage lenders, Care Ratings Ltd said in a note in December last year.

As on September 2019, corporate Loans constituted 39% of the AUM, healthcare equipment finance (10%), auto lease and vehicle finance (6%), SME lending (24%), consumer and personal loans (17%) and housing finance (4%).

The company’s adjusted gross and net NPAs on a combined basis were 0.63% and 0.41% of the total loan book as on September 30, 2019.

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