Canbank to up stake in Canfin to 51%

Canara Bank will increase its holding in Can Fin Homes (Canfin), a housing finance company, to 51 per cent from about 30 per cent through an open offer. The bank will later explore the prospect of merging it with itself.

The bank wants to increase the controlling rights and add value to the image of the housing finance company. "Allowing it (HFC) to work in present format with higher capital requirements will only mean stunted growth. Hence, we will convert the sponsored entity into a subsidiary through the open-offer", Canara bank chairman and managing director M B N Rao said. 

A STEP FORWARD Can Fin Homes performance (Rs crore)
Year	2004-05	2005-06	2006-07
Total income	127.53	148.21	190.00
Net profit	21.12	26.95	30.10
Loans disbursed	456.61	653.95	453.36
Outstanding home loans	1378.96	1773.45	1941.53

Bangalore-based public sector bank had established HFC is 1987 in association with financial institutions including HDFC and UTI. These institutions have reduced their holding through the secondary market.

The open offer for 43.14 lakh shares in being made at Rs 58 per share. The total consideration for open-offer works out to Rs 25.02 crore. The offer opens on October 18 , 2007 and close on November 17. The bank has has already obtained necessary permissions from Reserve Bank of India and the government of India.

The corporate bodies hold 18.5 per cent stake, while individuals had just over 43 per cent stake as end of March 2007, according to the Bombay Stock Exchange data. The stock opened at Rs 60.35, hitting the upper limit of the circuit.

Rao said after acquiring 51 per stake, the bank would review the business model and assess the capital requirements of Can Fin Homes. Among the options that bank would consider are merge with itself or establish fee-sharing arrangement for getting business.

Can Fin's outstanding home loan portfolio stood at 1,941.53 crore by end March 2007, up from Rs 1,73.45 crore a year ago. Its loan approvals dipped to 417 crore from Rs 824 crore in 2005-06. The disbursement declined to Rs 453.56 crore in 2006-07 from Rs 653.95 crore in 2005-06.