Retail investors have been caught on the wrong foot yet again in accumulating shares of Lakshmi Vilas Bank over the last two years even as the capital-starved lender was struggling with mounting losses, high non-performing assets (NPAs) and a host of other corporate governance issues.
According to latest shareholding data, retail shareholding in LVB increased to 46.73 per cent as of September 2020 from 39.04 per cent during the same period last year. The increase in retail participation came despite the lender being placed under the Prompt Corrective Action (PCA) framework by the RBI in September 2019 on account of high net NPAs, insufficient capital, negative return on assets (RoA) for two consecutive years and high leverage.
However, this is not the first time when retail investors were found catching a falling knife. In March, retail investors in YES Bank were also trapped in ‘value hunting’ when the share price eroded as much as 85 per cent in a day after the RBI superseded the board of YES Bank and imposed a month-long moratorium on the lender.
Also read: Lakshmi Vilas Bank bailout: A plum deal for DBS may nudge other foreign banks too
Retail holding in YES Bank stood as high as 47.96 per cent as of December 2019, against 16.27 per cent a year earlier.
Despite the caution by several market experts, retail investors lapped up the bank’s stock in the hope of making future gains. They stand to lose their entire capital as the RBI’s draft scheme of amalgamation with DBS India states that the entire amount of the paid-up share capital and reserves and surplus, including the balances in share / securities premium account of LVB will be written off and its shares or debentures will be delisted from stock exchanges.
The counter on Wednesday witnessed a trading volume of 29.45 lakh shares on the BSE and 25.45 lakh shares on the NSE.
Also read: Curious to know who bought Lakshmi Vilas Bank shares?
On the other hand, foreign portfolio investors (FPIs) ― known for their long-term structural bets ― nearly halved their exposure in LVB following the PCA being imposed. FPI holding in LVB fell from 12.25 per cent in September 2019 to 8.65 per cent as of the latest quarter. FPI holding in the bank was as high as 16.56 per cent in March 2019.
Shareholding of LVB by financial institutions and insurance companies fell marginally to 6.82 per cent as on September 2020 from 7.37 per cent during the comparable period last year.