Dhanlaxmi Bank tanks 7% after independent director quits over multiple issues

Shares of Dhanlaxmi Bank tanked 7 percent in early trade on September 18, on the news of an independent director resigning from the post.

At 9:47am, the Dhanlaxmi Bank stock was trading 3.95 percent lower at Rs 28.10 on the BSE.

Sridhar Kalyanasundaram, one of the independent directors of Kerala-based Dhanlaxmi Bank, resigned on September 16, citing multiple issues in the bank’s operations and internal battle within the Board, according to a communication from the bank to exchanges on September 17.

Kalyanasundaram, in his resignation letter to the Board of directors, has highlighted multiple issues, including lack of support from the board, issues related to a rights issue plan, capital enhancement plan, conduct of the bank’s board, probity and lack of consensus on the various ‘whistle-blower’ issues raised to the Directors and unethical conduct of bank’s business among other issues.

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“There are many instances where despite the value of the inputs given, my inputs have been deliberately negated/avoided/overruled by the other members of the Board, just to support the belligerent attitude of the MD and CEO -who is on public record (in the vernacular press) that he cares little for shareholders and the directors,” Kalyanasundaram said in his resignation letter.

“I am not the only or even the first director to face his wrath for not towing his line, as many had left rendering this Board legally inconsistent with required composition,” Kalyanasundaram added.

Dhanlaxmi Bank has 10 Board members, including two additional directors appointed by the Reserve Bank of India (RBI). The bank has been in the news for top-level resignations and operational issues in recent years.

Also Read: Dhanlaxmi Bank independent director Kalyanasundaram quits citing multiple issues

In his resignation letter, Kalyanasundaram said, the bank has been using a one-time settlement (OTS) process even where it had no impact on the NPA position of the Bank.

“The classic case in reference is to the recent OTS of the Jalan Hotels of Kolkata, where the OTS was used to release a guarantor – even after the original debtor had been cleared by the consortium of banks and lenders – and where your Bank held a Registered Charge against the property given as guarantee to the original debtor,” Kalyanasundaram said.

“Despite my advising the Board of the hugely discounted offer (Rs 5.25 crores against a reported market value of Rs 35 crores), I was voted out 6 to 1, and surprisingly even one of the additional directors appointed by the regulators supported the proposal brought to the Board,” Kalyanasundaram said. Further, Kalyanasundaram said despite numerous complaints against some board members, there has been no action yet.

“Some of such complaints have included even issues like material suppression of facts by some board members themselves. The collective responsibility of the Board in its failure to rectify such issues cannot be wished away and I personally do not want to be a part of a group that practices a belief that you can wish such behavior away,” Kalyanasundaram added in his resignation letter.

Kalyanasundaram concluded his resignation letter saying he prays that the Bank will be able to ward off the next round of predatory acquisitions that might be the effect if the proposed Rights Issue is taken forward, on his exit from the Board.

Other Board members of the Dhanlaxmi Bank are Managing Director and CEO Shivan JK and RBI-appointed Additional Directors DK Kashyap and Jayakumar Yarasi, G Rajagopalan Nair, CK Gopinathan, KN Madhusoodanan, Nirmala Padmanabhan and Vardhini Kalyanaraman.

The Kerala-based bank hasn’t had a chairman since the resignation of G Subramonia Iyer in December 2021. Iyer had resigned citing certain urgent and emergent domestic and personal reasons. He was appointed as part-time chairman in February 2021. His predecessor Sajeev Krishnan, too, had resigned in June 2020, citing personal reasons.

That apart, there have been several senior-level exits from the Dhanlaxmi Bank’s board over the last few years. On May 23, Moneycontrol had reported that the RBI had said no to a proposal by the bank to appoint G Rajagopalan Nair as its part-time chairman. The bank’s nomination and remuneration committee (NRC) and the board had in February cleared Nair’s name for the post. The proposal was subsequently sent to the banking regulator for clearance.

Stock Performance

Dhanlaxmi Bank stock has given a return of 100.12 percent over the last six months. The benchmark Nifty Bank index has given a return of 17.45 percent over the same duration.

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