DBS is seeking to wind up scandal-hit Novena Global Healthcare Pte Ltd (NGHPL), co-founded by Singaporean cousins Terence and Nelson Loh.

 

The bank has filed a winding-up application with the Singapore High Court.

 

In a statement on Friday, Mr Terence Loh said that he understands that DBS is requesting that insolvency professionals from accounting firm RSM be named as joint and several liquidators of NGHPL.

 

NGHPL is believed to have owed DBS millions of dollars, The Straits Times (ST) reported.

 

DBS declined to comment on the matter when approached by The Business Times (BT).

 

NGHPL is the Singapore subsidiary of the Cayman Islands-incorporated Novena Global Healthcare Group (NGHG), which has been in the limelight since Ernst & Young (EY) filed a police report alleging its unauthorised signatures had appeared on NGHG' s financial statements.

 

The police are not the only ones looking into matters related to the duo. In August, Singapore' s Accounting and Corporate Regulatory Authority told BT that it will take enforcement action after it was discovered that entities linked to the Lohs had not filed annual returns. These entities included NGHPL and Novena Life Sciences Pte Ltd.

 

RSM was recently appointed as special accountant for NGHG by the latter' s supervisory committee. Mr Terence Loh said this appointment was " made at the behest of the five lender banks of NGHG, including DBS" .

 

He believes a potential liquidation of the Singapore unit " may not necessarily result in the demise" of the parent company.

 

" I will continue to engage with RSM until any liquidation occurs, and will assist any appointed liquidators to recover value," Mr Terence Loh said in the statement.

 

In October, he legally severed all business links with his cousin and former business partner Mr Nelson Loh.

 

Under the agreement, Mr Nelson Loh would transfer all his shares in NGHG, Dorr Global Healthcare International Pte Ltd and Rock Star Advisors Pte Ltd to his cousin for S$1, and then resign as director of the three entities.

 

Mr Terence Loh, meanwhile, would transfer his shares in Singapore-incorporated Bellagraph Nova Pte Ltd (BN Sg) to his cousin for S$1 and step down as its director.

 

He remains a director of NGHG at the holding level and of NGHPL.

 

On Friday, Mr Terence Loh said that he understands RSM has been in touch with potential investors for the parent company, and some of these investors are conducting due diligence on NGHG.

 

He noted that he has been assisting RSM to facilitate discovery of financial transactions, documentation and shareholding of NGHG, and to expedite the corporate recovery of the group' s key businesses " to salvage value for all stakeholders" .

 

NGHG' s board in September set up a special committee - which does not include the duo - to investigate EY' s allegations that the audit signatures on NGHG' s accounts were forged, and to " restructure and scrutinise its affairs" .

 

Regarding EY' s allegations and other discrepancies that came to light recently at NGHG, Mr Terence Loh on Friday said he feels " deeply betrayed" by his cousin, who has left Singapore and " appears to have no intention to sort out this terrible mess we are left with" .

 

The Lohs this year formed Bellagraph Nova Group (BN Group), with Evangeline Shen. The new group, which is led chiefly by Ms Shen and is bidding for the Newcastle United football club, has drawn scrutiny after it was found to have doctored photos of former US president Barack Obama in its marketing materials.

 

Mr Terence Loh said last month that he was not given a specific role at BN Sg and was unaware of the entities of BN Group. He also resigned from BN Group then.

BIGGER scale for cheap, a drag on profitability or a culture clash?

 

Mixed views have emerged on what the proposed amalgamation of struggling Lakshmi Vilas Bank (LVB) into DBS' s India unit might mean for both parties.

 

The proposed takeover will not have an impact on DBS' s dividend payment, said the Singapore banking group' s chief executive officer (CEO) Piyush Gupta on Thursday, according to a Bloomberg report.

 

DBS India will pump in 25 billion rupees (S$463 million) in fresh capital if the deal goes through. It is said to be the first time the authorities have turned to a foreign lender to bail out a struggling local rival.

 

Sanford C Bernstein analyst Kevin Kwek said: " We aren' t particularly optimistic on the ability of any foreign players to do well in India, but this may be the ' bite-sized' approach for DBS to push the agenda harder."

 

" If we were to look for positives, this merger could facilitate a more meaningful push into both retail and SME (small and medium-sized enterprise) customers," Mr Kwek added.

 

Those that are upbeat on the deal include Moody' s Investors Service, Maybank Kim Eng (MKE) and JPMorgan.

 

The LVB franchise will likely start regaining deposit market share once a credible controlling shareholder comes in, said JPMorgan' s Harsh Wardhan Modi and Saurabh Kumar.

 

Moody' s believes the rescue will be a positive for LVB' s depositors and senior creditors as the Indian bank " will benefit from parental support from DBS, a very strong bank" .

 

MKE' s Thilan Wickramasinghe pointed to a commercial angle: " There are a lot of banks in India, and the fact that DBS India is brought in likely means that there are synergies to be had."

 

Willie Tanoto, an analyst at Fitch Ratings in Singapore, noted: " The (LVB) branches are the crown jewels and offer a ready-made network at a very affordable price."

 

However, scaling up might weigh on the Singapore lender' s profitability and efficiency, said Jefferies' Krishna Guha.

 

Although the estimated impact on DBS' s common equity tier-one (CET-1) capital will be negligible initially, an assessment of the book, risk management practices and subsequent growth may call for continued capital infusion, given LVB' s high non-performing assets (NPA) and negative equity, Mr Guha said.

 

Aligning the two banks' business cultures could also prove tricky.

 

One fund manager said the deal was a strategic fit but he also pointed to a potential culture clash. Ng Xin-Yao, Asian equities investment manager at Aberdeen Standard Investments, which holds DBS shares, pointed out that LVB " appears to have been operating under a different risk appetite and intensity of internal controls" .

 

The Indian bank " will need to be aligned with DBS' s prudent and conservative culture" , said Mr Ng.

 

Besides, DBS staff are trained in digital skills and strong underwriting processes at a multinational bank, while LVB has a more traditional client-focused approach, Reuters reported.

 

India' s banking union has also expressed reservations about the potential deal with a foreign bank, and demanded a merger with a national public-sector lender instead.

 

Fitch wrote in a commentary that the proposed takeover &ldquo is not sufficiently large to immediately affect DBS&rsquo s credit ratings&rdquo .

 

However, what it signifies about the Singapore group&rsquo s growth strategy could shape its earnings and capitalisation risks over the medium term and potentially alter its credit profile, the agency added.

 

The net loans of DBS India made up less than 1 per cent of the group&rsquo s loan portfolio at end-June, but if this proportion increases materially in the next few years, it could weigh on the bank&rsquo s blended operating environment factor score, on which Fitch already has a negative outlook.

 

Fitch added that it is &ldquo watchful if the proposed LVB acquisition is a harbinger of aggressive balance-sheet expansion - whether organically or inorganically&rdquo .

 

As at 10am on Thursday in Mumbai, LVB' s stock lost 19.7 per cent or 2.45 rupees to 10 rupees. The counter had fallen 20 per cent, the daily limit, at Wednesday' s close.