Southern discomfort

Dhanlaxmi Bank’s stock has plunged with allegations of financial irregularities

It is banker to over 2,000 religious institutions across Kerala, including the Guruvayoor temple, all the temples under the Travancore Devaswom Board and Kottayam’s Juma Masjid. Male volunteers from branches across the country head to Sabarimala every year to manage the temple’s collections from devotees during the pilgrimage season — they count millions of coins, sort them according to denomination and even organise tractors to cart sacks of change to branches across the state. “We are god’s own bank in god’s own country,” says PG Jayakumar, the new managing director and CEO of Dhanlaxmi Bank. “We have the Lord’s blessings.”

Those blessings are desperately needed right now. The past year has been one of turmoil and trouble for the 85-year-old Thrissur-headquartered bank, culminating in the unceremonious exit of MD and CEO Amitabh Chaturvedi in February this year. The unrest in the labour unions, which had voiced their displeasure with Chaturvedi’s strategies and alleged accounting irregularities, as well as Chaturvedi’s own differences with the board over the high-cost growth model, are not only showing up in the bank’s P&L, they’ve also impacted the stock. 

Analysts believe Dhanlaxmi’s ₹36.87 crore loss in the December quarter of FY12 is the first of what is likely to be several quarters of loss for the bank and that it will close FY12 in the red. Meanwhile, over the past year, not only have credit rating agencies Fitch and Icra downgraded the bank, the stock has also underperformed the Sensex, falling 42% compared with a 9.74% fall in the benchmark; in the same period, its peers Federal Bank and South Indian Bank have seen a 7% and 15% rise in stock prices. All of which is fuelling speculation that Dhanlaxmi is ripe for takeover. However, the bank management denies rumours of a sell-out. “There is no question of a takeover or merger,” says Jayakumar. But Dhanlaxmi needs capital and if it fails to raise it, it will have to explore other options. 

The Chaturvedi effect

Rumours of a takeover at Dhanlaxmi aren’t new. They were last heard in October 2008 when Chaturvedi, who had left Reliance Capital, took charge of the southern bank. Speculation was rife at the time: was the Anil Ambani confidante ‘on deputation’ to set the


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