Shares of private lender Dhanlaxmi Bank recovered today after falling 10% as compared to the previous session close during the intra-day trade, following the resignation of its independent director Sridhar Kalyanasundaram on Sunday. The shares, which opened a gap down at ₹27.61, surged to a 52-week-high of ₹33.83 and settled to close 4.5% up at ₹30.59 on the BSE.
The Thrissur, Kerala-headquartered bank had appointed Kalyanasundaram as independent director in December 2022. He resigned from the board on September 16, 2023, accusing the other board members of a "lack of depth of knowledge in banking" and "factionalism".
Kalyanasundaram raised issues over a planned rights issue, saying it was approved in March 2022, and that there are many issues that remain “unresolved”.
"The Rights Issue of the Bank - was approved by the Board of the Bank on the 171h March 2022, and had to be held up for over 9 months since then due to the various issues at the Board, including the status of the Board itself 'lacking composition required to transact the Rights Issue' till the 95th AGM of 30th December 2022 - the delay due to the two writ-petitions and resultant 'compromise settlements', etc," says Kalyanasundaram.
Despite that, he says, from January 6, 2023, the equity issuance committee applied to get the issue of the block, and he personally raised 81 queries on the then-submitted version. "It is even today unresolved, despite various legal inputs from different quarters, and 'compromise meetings' held by the EIC chairman in June/July," he adds.
He accused the board of using a "bulldozer approach" or openly threatening him to be “sacked from the board”.
On the capital enhancement, he says he advised colleagues that the proposed rights issue-based infusion of ₹130 crore is “not sufficient” if the bank was to remain competitive and relevant, but he says the board members deliberately "stifled discussions" by other members, in particular him.
"I had advised the irregularities in the manner that the MD and the company secretary were conducting the board and committee meetings deciding on the agenda and the frequency of the same, at both the meetings of the independent directors. It was brushed away as 'not a serious issue'."
He also flagged "probity and lack of consensus" on the various 'whistle-blower' issues raised to the directors. "The board has been in receipt of numerous complaints of both the anonymous and the signed varieties but has been singularly focused on dismissing all of them as "the habit in this Bank over time".
He says there is no consensus on demanding action by the CVO on any or all of them. "In fact, the CVO appointment itself proved a challenge and had to be completed only recently, and that too due to pressure from the regulators and not as a function of the board oversight itself."
He accused members of "unethical conduct" with regard to conducting business. "While the OTS scheme has been put to use to a great deal of success by the banking sector at large -- to effectively deal with the NPA positions -- it has been seen being used even where it had no impact on the NPA position of the Bank, by its executives."
Dhanlaxmi Bank reported a Q1 FY24 profit of ₹28.3 crore, as compared to the loss of ₹26.4 crore loss during the same quarter last year. Its income stood at ₹341.4 crore in the June 2023 quarter as compared to ₹236.8 crore in the year-ago period.