Centurion Needs Rs 160 Crore For 9% Car

A potential investor in Centurion Bank will have to bring in around Rs 160 crore to turn it around and bring its capital adequacy ratio (CAR) to the Reserve Bank of India stipulated 9 per cent.

Centurion's CAR stood at 4.05 per cent in the first quarter of 2002-03. The bank is also looking at selling or leasing some of its fixed assets as a part of balance sheet management. Centurion Bank chairman and managing director V Janakiraman said, "The bank would need Rs 120 crore of Tier I capital and Rs 30 to Rs 40 crore of Tier II capital. The investor will also have to bring in additional money for fresh business."

He said if a new bank has to be set up, an investor will have to bring in Rs 300 crore out of which Rs 200 crore have to be brought in upfront. "It will also take the bank a lot of time to reach the level of Centurion Bank's network," said Janikaraman.

He added that existing shareholders of Centurion are also willing to chip in through a rights issue.

Centurion's major foreign stakeholders include Keppel Bank of Singapore with around 17.5 per cent stake held through Kephinance Investment (Mauritius) Pte Ltd, the Asian Development Bank with 10.22 per cent and the Washington-based International Finance Corporation with 8.36 per cent. Dev Ahuja, the promoter of the bank, now holds only around one or two per cent compared with around 8.5 per cent before, according to Janakiraman.

On Andhra Bank's interest in Centurion, he said, "The Reserve Bank of India is not forcing a merger. It is an option which is still open."

Andhra Bank had earlier appointed Deloitte Haskins & Sells for the valuation of Centurion Bank, while Centurion had sought the services of Kalyaniwalla and Mistry to take a look at the books of Andhra Bank in the run-up to deciding on a swap ratio for the merger.

Jankiraman said a suitor can be finalised before the end of the current financial year and the clean-up work done by the present management should help the suitors be more comfortable.

The bank, as a part of a massive clean-up operation, booked a loss of Rs 161.84 crore for the year ended March 31, 2002, while for the first quarter of the current fiscal it has booked an operating profit of Rs 7.80 crore and a net loss of Rs 3.66 crore.

"The losses incurred were due to certain extraordinary provisions and write-offs relating to the previous periods in respect of assets and liabilities taken over from the erstwhile 20th Century Finance Corporation following its merger with the bank in 1999," Jankiraman said.

"At the time of the merger some things were not done. The auditors were not alone. The management of the bank was also responsible."

The bank had taken over Rs 700 crore of assets and liabilities from 20th Century. The bank had already started selling some of these assets like windmills and has realised Rs 25 crore. It is also looking at selling or leasing some of the fixed assets as a part of its balance sheet management.