Centurion To Raise Rs 45-50 Cr Tier-2 Funds

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Mumbai, Sept 23: The Centurion Bank is planning to raise about Rs 50 crore by way of subordinated debt (Tier-II capital) in the current fiscal to augment its capital adequacy ratio (CAR) and meet its short-term business growth objectives.

“We will need capital to grow our business. We have just raised Rs 90.8 crore through rights issue and plan to raise another Rs 45-50 crore of tier-2 capital in the current fiscal,” Centurion Bank managing director Shailendra Bhandari said.

The bank’s CAR as on March 31, 2004 was 4.41%. The bank had raised Rs 43 crore in June 2004 by issuing unsecured non-convertible subordinated bonds.

“The CAR of the bank post rights issue will enable us to meet the Reserve Bank of India (RBI) norm on capital adequacy,” Mr Bhandari said.

The bank needs capital for both growth purposes and also to fund infrastructure growth, including expansion of its branch network and other distribution channels.

The bank recently obtained RBI approval to convert its 14 marketing offices into branches. With the new branches, the bank would have 75 branches, 22 extension counters and 149 ATMs spread across the country.

The bank was recapitalised recently by a group of international investors. A group of investors including BankMuscat, Keppel Corporation, Sabre Capital and Asian Development Bank had infused Rs 154 crore of equity capital in February 2004. As on March 31, 2004, eligible tier-1 capital was Rs 61.56 crore and eligible tier-2 capital stood at Rs 26.56 crore. Following the recently concluded rights issue, the bank’s total shareholders fund will stand at Rs 152.36 crore.

On further raising of tier-1 capital, Mr Bhandari said,”We do not intend to raise tier-1 capital further in the short-term. If the draft policy framework for ownership and governance in private banks, which inter-alia proposes that private sector banks should have a minimum networth of Rs 300 crore at all times, is implemented, the bank, like many other private sector banks, will have to raise further capital.”

Rights Issue Oversubscribed
Centurion Bank’s Rs 90.8 crore rights issue has been oversubscribed. The rights issue was in the ratio of two equity shares for every five shares held. The issue was priced at Rs four per share, including a premium of Rs three per share.