In a major development for the customers of Lakshmi Vilas Bank (LVB), the resolution process has been completed in just a week’s time. The bank will be renamed as DBS India now. However, The trading in Lakshmi Vilas Bank  shares has been suspended from today. What does this mean for the investors? Zee Business Managing Editor Anil Singhvi gives his take on the development. 

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Investors who bought Lakshmi Vilas Bank shares on Wednesday after the cabinet nod for its merger with the DBS Bank came, appear to be quite brave, the Market Guru said. This was after the Reserve Bank of India (RBI) circular which clearly says that the stock of LVB will be discontinued from trading once the merger is approved.  

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What has been positive in all this exercise is that immediately after the announcement of Lakshmi Vilas Bank moratorium, the announcement of a takeover by DBS came. This has prevented long lines outside the banks after a Rs 25,000 limit was made. This has been a sharp and incisive move by RBI. It has identified the bank. The entire process has been done with a lot of alacrity, which is unprecedented, he further said. 

Raising a big concern, the Market Guru said that it was uncommon that the existing shareholders’ value in a company becomes nil after a merger.  

What it means for investors?   

Zee Business had earlier given a bold call on Lakshmi Vilas Bank stock when the first circuit was implemented, and which was to exit the stock as quickly as possible. RBI has clearly said that the value of equity is zero. There is a misconception among many investors which the channel would like to remove, Singhvi said. 

On Wednesday, the channel has said that all those investors who are buying Lakshmi Vilas Bank share will have to bear a loss of Rs 7.65. The entire capital is of this value, he added. From today, the value of these shares has become “zero”. 

He said that it will be incorrect to assume that the Lakshmi Vilas Bank shares will convert into DBS shares after the merger process is completed. The value of LVB equity is zero and no investor is getting DBS share, he clarified.  

Singhvi said that it is unfortunate that the people will lose money despite the repeated warnings from the channel, the Managing Editor said. Why people risk their investments in penny stocks is surprising as there was no reason to buy Lakshmi Vilas Bank stock at Rs 7.65. 

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Lakshmi Vilas Bank  stock has been delisted, he concluded.