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| Central Bank starts process to sell mortgage arm |
| Manojit Saha / Mumbai Oct 22, 2009, 00:02 IST |
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Central Bank of India has started restructuring its home finance subsidiary, Centbank Home Finance, in an attempt to raise the valuation of the mortgage company before selling it.
The Mumbai-based public sector lender had appointed Ernst and Young for advice on restructuring and valuation, bank sources told Business Standard.
According to the plan, the bank will first buy the shares of other shareholders in the home finance arm. A Central Bank executive indicated the bank had already started negotiating with other shareholders. The home finance arm is proposed to be sold over the next two years.
Central Bank has a 59.5 per cent stake in the subsidiary while UTI and National Housing Bank have 16 per cent each. The remaining 8.5 per cent is held by Hudco. While Central Bank nominates five directors on the board of Centbank Home Finance, Hudco, NHB and UTI nominate one director each.
The capital base of the home loan company is Rs 20 crore while the net worth is Rs 48 crore. During 2008-09, the mortgage company's net profit was Rs 3.18 crore. Its gross outstanding loans were Rs 257.88 crore at the end of March.
During the current financial year, Centbank Home Finance is planning to disburse around Rs 150 crore, which will be twice the amount sanctioned last year. It is also planning to increase the average loan size to Rs 10-15 lakh from the present level of Rs 3 lakh.
In order to increase the profitability of Centbank Home, Central Bank recently provided it a credit line of Rs 100 crore that would be partly used to repay the entire debt of NHB.
The recast exercise included shifting the head office of Centbank Home office from Bhopal to Mumbai.
Most public sector banks with separate home loan arms have exited or are in the process of exiting the business to avoid duplication as they themselves offer home loans.
In May, Punjab National Bank sold 26 per cent in its home loan arm, PNB Housing Finance, to Dawnay Day, with an option to sell another 25 per cent. IDBI Bank is also planning to sell its home loan subsidiary.
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