Dhanlaxmi Bank Sees A Return Of Shareholder Strife

According to the first person quoted above, the shareholders have been irked by the bank’s decision to not include them as directors on the board, even though the nomination and remuneration committee of the same board found them to be eligible.

In a recent letter to RBI Governor Shaktikanta Das, shareholders said that by rejecting the candidature of Pillai and Vijayakumar, the board “has shown utter disregard to principles of corporate governance”. BQ Prime has reviewed a copy of the letter.

“The bank has been facing a lot of governance Issues since the new MD took over and has a very truncated board. The attempts to fill in vacancies were met with stiff resistance from the two nominees Sri Jagan Mohan G and Sri DK Kashyap of RBI in the board with active support of MD and part-time chairman of the board for reasons best known to themselves,” the shareholders have alleged.

Mohan left the Dhanlaxmi Bank board on May 30 and the RBI appointed Jayakumar Yarasi in his place as nominee director, according to an exchange notification.

Shareholders have also raised concerns against independent directors, whom they allege want to take control of the bank.

“Any move on the part of shareholders to increase market capitalisation is resisted by these directors who always wanted to have total control in the bank with support from RBI nominees,” the shareholders said in their letter.

Apart from this, shareholders have opposed the opening of new branches and appointing senior officials from other banks, which is adding to cost pressures, the first person said. On April 1, the lender had announced to the exchanges that the regulator had allowed Dhanlaxmi Bank to open 20 new branches.

In the year ended March 31, operating expenses rose 8.5% year-on-year to Rs 397.14 crore. The bank’s cost-to-income ratio, though, dropped to 74.73% in the fourth quarter of FY22, from 81% a year ago.

If the current CEO is not willing to listen to the shareholders’ demand, they may even seek to oust him, the second person quoted above said. To be sure, a decision in this regard is yet to be made.

JK Shivan and PK Vijayakumar declined to comment. An email sent to Ravindran Pillai remained unanswered.

Amit Tandon of Institutional Investors Advisory Services said the board as well as shareholders have the ability to hire and fire a CEO.

“Even if a CEO was appointed with their approval, the shareholders can call for a vote on his/her tenure and vote on the proposal. We’ve to remember that all of this at the end of the day is coming from a need to exercise greater corporate control,” Tandon said.