Hsbc, Amro Join Race For Centurion Pie

HSBC and ABN Amro seem to have entered the race for picking up a stake in Centurion Bank.

They join Citibank, Infrastructure Leasing & Financial Services Ltd (IL&FS) and Bank Muscat. Two other Indian outfits have also evinced interest in picking up stake in the bank.

A Centurion Bank source said three of the suitors have already carried out due-diligence process and HSBC is the fourth one to do so. ABN Amro and Bank Muscat are expected to kick off a similar process after a few weeks. "The bank will take a decision on the sale next month," the source said.

HSBC has started the due-diligence exercise around a week back. Both HSBC and ABN Amro declined to comment.

The foreign banks operating in India are readying to take stakes in local banks hoping that the forthcoming budget would ease the foreign direct investment (FDI) norms -- thus allowing them to take at least 49 per cent stake.

At present, FDI in banking is capped at 20 per cent even though the combined FDI limit (including the holdings of foreign institutional investors, non-resident Indians and overseas corporate bodies) can go up to 49 per cent.

According to sources, Centurion Bank is likely to offer more than 26.2 per cent stake to the strategic partner.

This is the block of shares owned by TCFC Finance Ltd (TFL), which translates into 4 crore shares with a face value of Rs 40 crore.

20th Century Finance Corporation (TCFC), which had merged itself with the bank in 1998, had an agreement with TFL that the investment company would have a liability of a maximum of Rs 40 crore to make good the incremental provisioning on account of non-performing assets (NPAs).

The cummulative provisioning till March 31, 2001, was to the tune of Rs 29.92 crore and the estimated provisioning this year is pegged at Rs 10.08 crore, thereby bringing the total provisioning to around Rs 40 crore.

Citicorp and KPMG are currently doing the due-deligence for Citibank. The merchant banking arm of IL&FS has already completed the due deligence of Centurion Bank for AIG Sectoral Fund.

According to sources, Centurion Bank is likely to receive between Rs 20-Rs 23 per share through this stake sale. The bank has 57 branches, 12 extension counters and 130 ATMs across the country. It also has a network of around 10 TCFC marketing offices. These offices serve as client servicing offices for two wheeler and commercial vehicles portfolio.