The Hindu : Centurion Bank's revamp plan

Online edition of India's National Newspaper
Thursday, Apr 24, 2003

Business

Business

Centurion Bank's revamp plan

By Our Special Correspondent

MUMBAI APRIL 23. The board of Centurion Bank today approved the restructuring proposal for the bank submitted by Sabre Capital Worldwide. "Sabre, headed by Rana Talwar, former worldwide Group Chief Executive Officer of Standard Chartered plc, has taken the responsibility to turnaround the bank, with a path-breaking recapitalisation and revitalisation proposal, which is the first ever for the private sector bank in India," said V. Janakiraman, Chairman and Managing Director, Centurion Bank.

The proposal envisages Tier-1 capital infusion of Rs. 319 crores in two phases — Rs. 219 crores in Phase-1 and Rs. 100 crores in Phase-2. The first phase involves a reduction and reconstruction of the existing capital. The capital infusion by the new investors will be at Rs. 4 per share. The second phase of capital infusion of Rs. 100 crores is expected to be undertaken two years hence at terms to be determined at the appropriate time.

"The proposal also involves the merger of the business of the branch of a foreign bank with Centurion," said Mr. Talwar. The foreign bank would also participate in the capital infusion. The participation of the foreign bank, which Mr. Talwar preferred not to name, is subject to obtaining final regulatory approvals, he said. The proposal will be put through a court scheme under Section 391-394 of the Companies Act.

The existing shareholders will have an opportunity to participate in the rights-cum-public issue at the same price as new investors and thereby derive benefits from the recapitalisation and revitalisation scheme. Explaining the tranche infusion of capital Mr. Janakiraman said that the first infusion of Rs. 219 crores would ensure the bank meet capital adequacy and the second infusion will support the future growth of the bank. According to him, the bank would achieve a capital adequacy of around 10 per cent.

Mr. Talwar complimented the efforts of Mr. Janakiraman and the bank's board, especially on the progress made in cleaning the balance sheet over the last 12 months. "We believe that with a focus on nationwide retail banking, Centurion has the potential to become a major player in financial services sector over the next few years," he added.

Sabre's trend setting proposal involves a large number of strategic and tactical contributions to the revitalisation of the bank. The focus will be to provide strategic leadership to the bank and to attract high quality management. The management and the board will ensure world-class corporate governance and quality customer service, which will strengthen investor and depositor confidence in the bank.

Until completion of all necessary formalities, Sabre will assist the bank in putting together a management team under a new Chief Executive Officer. Sabre has requested Mr. Janakiraman to continue as Chairman of the bank until all regulatory approvals are in place whereafter, Mr. Talwar is expected to take over as Chairman.

Mr. Janakiraman said the stake of former promoter, 20th Century Finance (40 million shares), was surrendered to a trust that can be realised for the benefit of the bank. After the infusion of Rs. 219 crores, the shareholding of Asian Development Bank (ADB), Keppel Bank of Singapore and International Finance Corporation (IFC) would come down to 16.1 per cent from the present 36 per cent, the trust's present 26 per cent stake would be reduced to 5.5 per cent, public holding would come down to 30 per cent from 37.5 per cent and the Sabre Capital Worldwide would have 48 per cent stake.

Printer friendly page
Send this article to Friends by E-Mail

Business