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Centurion suitors develop cold feet

BS Banking Bureau

All the suitors of Centurion Bank who have been conducting a due-diligence exercise, have decided against picking up a stake in the bank.

The bank is now expected to renew its search for suitors after a thorough clean-up of its balance sheet.

It is expected to post over Rs 750 million net loss for the fiscal 2002 after making huge provisioning on account of non-performing assets.

The selling points of Centurion Bank are its 57 branches, 17 extension counters, 135 ATMs, a good technology platform and its retail customer base both on the liabilities as well as assets side.

It also has the network of 45 TCFC marketing offices which serve as client servicing offices for two-wheeler and commercial vehicles portfolio.

Six entities -- Infrastructure Leasing & Financial Services Ltd, Vysya Bank, Bank Muscat, Citibank, HSBC and ABN Amro -- had envisaged an interest in the bank. These banks were looking at buying out Centurion Bank promoter Dev Ahuja's 26 per cent stake in the bank held through TCFC Finance Ltd.

Bank Muscat, Citibank and Infrastructure Leasing & Financial Services Ltd had completed the due diligence. Citicorp and KPMG did the due diligence for Citibank while the merchant banking arm of IL&FS had conducted the due diligence of the bank. IL&FS had done the exercise on behalf of IL&FS-AIG sectoral fund. Bank Muscat was the last to complete the due diligence.

These three entities were serious about picking up a stake in Centurion Bank after the government allowed up to 49 per cent foreign direct investment in Indian banks. Subsequently, the budget had allowed foreign banks operating in India to come in through the subsidiary route too.

Centurion Bank has been looking at a total capital infusion of around Rs 2.5 to Rs 3 billion. The bank is in need of fresh capital infusion as it will end up recording a capital adequacy ratio much below the stipulated 9 per cent level at the end of the fiscal year 2002. The CAR of the bank as on the end of December 2001 was at 9.13 per cent.

For the nine months ended December 31,2001 the bank has posted a net loss of Rs 522 million. The bank had made provisions of Rs 676 million for the nine month period ended December 31, 2001 compared to Rs 107 million the previous year.

The major foreign stake holders in the bank includes Keppel Bank (around 17.5 per cent) through Kephinance Investment (Mauritius) Pte Ltd, Asian Development Bank (10.22 per cent) and the International Finance Corporation (8.36 per cent). Ahuja now holds 8.5 per cent.

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