Centurion Preferential Float On The Cards

Centurion Bank is likely to come out with a preferential issue to augment its capital base. The bank desperately needs to shore up its capital base as it is already facing strain in terms of manoueverablity on the advances front, a top Centurion Bank official told Business Standard.

Earlier this year, Centurion had proposed to raise Rs 128.80 crore through a rights issue, which eventually failed to elicit investor interest. The bank had to refund the issue collections.

Despite the strained capital adequacy ratio, Centurion has been able to manage its lending operations through balance sheet management, the official said.

As it has exhausted the limit for raising subordinated capital, the bank will necessarily have to come out with a preferential issue, sources said.

Centurion is yet to finalise the size of the proposed issue as also the target investors. The official added the size of the issue will depend on the bank's assessment of its growth plans.

Keppel Tatlee Bank of Singapore holds around 17.71 per cent and the bank had indicated that it was ready to increase Keppel's shareholding to 20 per cent. However since Keppel is likely to be taken over by the Overseas China Banking Corporation, the plan too is in jeopardy till OCBC decides to make the investment.

The promoters' stake in the bank is around 23.12 per cent. The other major promoters of the bank are Asian Development Bank (ADB), Manila and International Finance Corporation (IFC), Washington.

According to sources, in order to tide over the present crisis, the bank is focussing on investments in low risk weighted assets like government securities, letter of credit discounting etc. Lending operations are now are being taken care of from repayments on its assets in retail lending, commercial vehicle segement, two wheeler financing etc.

Centurion has an expsoure to the Ketan Parekh group to the tune of Rs 40 crore. However officials claim that the bank has a collateral of around Rs 30 crore and that Praekh had recently indicated his willingness to repay the outstanding loans. Also in the Calcutta Stock exchange payment crisis, the bank's gurantees of around Rs 3 crore to three stock brokers was invoked. However after taking into account cash margins the bank has a gap of around Rs 2.25 crore.

However officials added that the brokers have expressed their willingness to repay their accounts. The bank has a capital market exposure of around Rs 280-290 crore which will have to be bought down to around Rs 110 crore, according to the revised Reserve Bank of India norms.