All is not well within the Thrissur-based Dhanlaxmi Bank.
Recently, a series of back-to-back exits from the Board had alerted the central bank and Dhanlaxmi’s investors. There is no single promoter for the Kerala-based bank but a significant stake in the bank is held by local businessmen, who wield huge influence in its operational affairs.
Lobbying, infighting at the top and an exodus from the Board has already alerted the regulator, which early this month wrote to the Board seeking termination of a key executive—one chief general Manager, P Manikandan.
It’s unprecedented for the banking regulator to intervene in the matter of a CGM-level officer. But the regulator was upset about the non-adherence to the highest standards of corporate governance and Manikandan’s alleged involvement in board matters, according to persons familiar with development. The RBI had received complaints against this officer, they said.
On the very day the bank received the letter from RBI, Dhanlaxmi’s Board met through a videoconference and sought Manikandan’s resignation. Three Board members had quit in June this year, including the Chairman, citing personal reasons. The first one was on June 29 when Sajeev Krishnan, part-time chairman and independent director, quit. Krishnan had joined the Kerala-headquartered bank in February 2018 for a three-year spell. He had around eight months left in his term.
The other two were KN Murali, independent director, and G Venkatanarayanan, an additional director. Both resigned with effect from June 29, 2020, before their terms came to an end. Murali joined the bank nearly a year and a half ago while Venkatanarayanan joined only a few months ago.
Following these exits, the bank had appointed new Board members. These include PK Vijayakumar, G Rajagopalan Nair, G Subramonia Iyer and Suseela Menon R, also as additional directors (Independent Category) to the Board.
AGM crucial
It is in this backdrop the bank’s annual general meeting (AGM) is scheduled to be held tomorrow (30 September). There are rumours that a section of shareholders could vote against the CEO, Sunil Gurbaxani. Moneycontrol couldn’t independently verify this information.
One of the AGM agenda items is approval of Gurbaxani as MD and CEO of the bank. A section of influential shareholders do not want Gurbaxani to continue and might vote against him, said two persons familiar with the development. “If that happens, that action may irk the central bank since Gurbaxani was appointed by the RBI. His ouster, if happens, could lead to RBI’s significant intervention in the bank,” said one of the persons quoted earlier. Both declined to be named.
When contacted, Gurbaxani refused to comment for this story.
North Vs South
One of the reasons for differences among different factions in the bank was divided opinion with respect to the issue of considering investments from a “North Indian lobby”, said one of the Board members who spoke to Moneycontrol on condition of anonymity. A clutch of investors has approached the bank informally seeking to pick a significant stake in the bank.
“The bank has been approached by certain investors for a significant stake. We do not want to sell the bank and lose the identity of this bank which has strong roots in Kerala,” said one of the Board members requesting anonymity.
The recent resignations came not long after new Gurbaxani assumed office as CEO in February 2020. Gurbaxani, a veteran banker, has 35 years of experience with the State Bank of Bikaner & Jaipur (now State Bank of India), and Axis Bank.
As of March 2020, prominent investors in the bank include B Ravindra Pillai (10 percent), Gopinathan C K (7.5 percent) and Kapilkumar Wadhawan (5 per cent). Foreign portfolio investors hold 11.4 percent.
The outcome of the AGM tomorrow will be critical to decide the future course of the bank that is already facing challenges on the operational front and is in need of capital to grow.
Last week, Lakshmi Vilas Bank shareholders ousted seven directors including the interim CEO and statutory auditors. Shareholders were unhappy about the way the Board and the management function and the deteriorating financial situation of the lender. Following this, the RBI appointed a three member committee of directors to oversee the daily functions of the bank.
Dhanlaxmi Bank posted a 69 percent decline in its net profit at Rs 6.09 crore for the first quarter ended June 2020 due to higher provisioning.
The bank had registered a net profit of Rs 19.84 crore during the same quarter of the previous fiscal.
On a sequential basis, however, its net profit in the quarter under review increased from Rs 2.6 crore in the March 2020 quarter.
Total income during April-June 2020 increased to Rs 278.62 crore from Rs 256.75 crore in the year-ago period, the lender said in a regulatory filing.
