Lakshmi Vilas Bank is on the investors’ radar as its share price has doubled since May on the buzz of a stake sale to foreign funds. LVB is indeed planning to raise capital to almost ₹500 crore by selling 4.25 crore shares, about 23.5 per cent stake. The lender has engaged merchant bankers to advise it on the possible route to raise the capital to shore up its capital adequacy ratio (CAR), which has fallen to 10.67 per cent as on March FY16 from 11.34 per cent in FY15. Speaking to BTVi , Lakshmi Vilas Bank MD and CEO Parthasarathi Mukherjee says the bank is yet to decide on the exact route, investors or the extent of capital that needs to be raised. But the lender is certainly on the lookout, says the veteran banker who has worked with Axis Bank and State Bank of India. The fund-raising process could be in tranches, but the bank hopes to shore up its CAR to 11 per cent by the end of FY17. Excerpts:

Can you take us through your fund-raising plans? Have you identified any investors, and is there a timeline for completing the entire capital?

No we haven’t. We do have the necessary approval in place at this stage. And it is also true that we need to raise capital, and that has to happen sooner rather than later. But we have not yet decided on the exact route, investors or the extent of capital that we need to raise at this point of time. But, certainly, we are on the lookout.

On the 23.5 per cent stake you plan to sell, will it be in one go or staggered in tranches?

It need not necessarily happen in one go. It could happen in one go. But that will be more of a function of the route we take, the sort of investors we get and the market conditions.

Given the big trigger of bond rally and the positive cheers on the treasury income, how has it panned out for LVB in Q2?

Treasuries are doing all right.

Have you booked profits by shifting bonds from held-to-maturity (HTM) to available-for-sale (AFS) book?

That was done earlier (in Q1).

Are you switching from the old to new bonds?

Traders take decisions from time to time. I don’t necessarily get into that at this time. They do it from time to time.

As far as the focus on retail and SME books are concerned, what traction are you seeing in that segment? Has anything major happened in Q2?

The progress is quite slow at this moment. This is a sort of complete rebuilding of a business for us. I guess it will be slow to start with. We have a fantastic team in this bank. It is all a question of completely re-strategising how we build these books, and which is what we are trying to do. You have to appreciate that it will take a bit of time. So I can’t say that growth is fast on the SME front at this point of time. But I think it’s more deliberate at this moment.

You have hired banking veterans to possibly shore up the performance of the bank? What is the year looking like as far as asset quality is concerned? Are there any fresh slippages on key stressed accounts?

The bank has done quite well on the asset-quality side. Our bank loan book is quite granular in nature. You cannot predict the quality of small assets. They often tend to struggle throughout the quarter but manage to make good at the end of the quarter. By and large, the books are looking all right, and I do anticipate that asset quality will be generally under control.

Are you thinking of any additional measures to shore up CAR as it is below 11 per cent as of now?

The bank will be raining necessary capital in due course and the CAR will be comfortable by end of FY17.

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