Andhra Bank To Buy Out Fis From Housing Arm

Andhra Bank has decided to buy out the institutional shareholders from its subsidiary, Andhra Bank Housing Finance (ABHFL). The bank is planning to merge the arm once it acquires the entire stake.

The bank's board will meet shortly to appoint an independent valuer to conduct a due diligence and valuation of its shares.

Of the subsidiary's Rs 19.78 crore equity, Andhra Bank holds 59.83 per cent, while ICICI, IFCI, Unit Trust of India and National Housing Bank (NHB) hold 2.52 per cent, 5.59 per cent, 10.67 per cent and 21.39 per cent, respectively.

The bank has been weighing a merger of the arm for quite some time, since it would bolster its existing operations in the home finance arena.

"The bank offers lesser interest on housing loans than ABHFL, which is proving to be disadvantageous to the latter. Thus, competing for the same business does not bode well for the two entities. While the bank offers loans on a daily diminishing balance method, ABHFL offers loans under the annual diminishing balance method. This is another adverse factor for the arm. These issues made us consider a merger," A L Nageswara Rao, director, ABHFL, and general manager (Planning) at Andhra Bank, said.

The 11-year-old subsidiary has posted a net profit of Rs 6.15 crore on a total income of Rs 40.18 crore for the year ended March 2001. Its net worth for the same period was Rs 33.41 crore. The reserves have increased to Rs 13.65 crore compared to Rs 10.39 crore on March 2000. It has sanctioned a cumulative loan amount of Rs 400 crore and disbursed Rs 351 crore loans to 21,588 housing units.

ABHFL has 18 branches, most of which are in Andhra Pradesh. The company has liabilities of Rs 248.4 crore, of which public deposits constitute Rs 101.27 crore, refinance from the National Housing Bank is Rs 113 crore and term loans of Rs 34.13 crore from Andhra Bank.