'Yet to decide timeline for Destimoney stake sale'

KOCHI: Private sector Dhanlaxmi Bank is yet to decide a timeline for the stake offload of 15% which it currently holds in Mumbai-based securities firm Destimoney Securities Pvt Ltd, said bank managing director and CEO P G Jayakumar. The Thrissur-based bank had announced in March that as part of exiting its non-core businesses, it would be scouting for a buyer for its stake in Destimoney, acquired for Rs 13 crore in 2010.However, the process ran into obstacles because of National Stock Exchange (NSE) rules which do not allow the bank to exit its investment in Destimoney before three years.
"The Reserve Bank of India had told us that we could not continue as a dominant promoter in Destimoney, and has given us the go-ahead for a stake sale. The three-year bar on selling the stake as specified under NSE rules is the only hurdle. As such, we don't have a timeline for the sale. And, RBI too has permitted us to take our time with it; a formal exchange of letters would be enough to conclude the transaction whenever it happens," he said. The bank had picked up the stake with the aim of becoming an integrated financial solutions company, before running into problems with rising salary costs and operating losses for two straight quarters during 2011-12.
Investors Destimony include Bilpower Ltd, PE firms New Silk Route, Starlight Investment and UK-based businessmen Raghuvinder Kataria, who currently holds a 26% stake in the company. Formerly owned by New Silk Route and known as Dawnaday, Destimoney Securities is a 100% subsidiary of Destimoney Enterprises, a financial services advisory. A member of the BSE and NSE, the firm has a network of 16 branches and more than 100 franchisees covering 50 cities.
As part of restructuring, Destimony has infused around Rs 40 crore through new investors, including Dhanlaxmi since 2010.
Thrissur-based Dhanlaxmi Bank posted net losses of Rs 36.87 crore in the third quarter of fiscal 2012 ending December 31, 2011. Although total income of the bank during the quarter increased 38% to reach Rs 390 crore from Rs 283 crore in the corresponding quarter of the previous fiscal, total expenditure rose a steep 61% to reach Rs 427.3 crore.
Net non-performing assets (net NPAs) stood at Rs 33.8 crore, while percentage of net NPAs fell to 0.35 per cent at the end of December 2011.
In an attempt to wriggle out of its losses, the bank is planning to rationalise employee salaries and simultaneously raise capital through a bond issue.
The bank management has ruled out addition of new branches and ATMs during the current fiscal as the bank is currently putting its revival/turnaround plan into action, cutting costs and stabilizing its overall operations.