Although Centurion Bank is offering 3.37 crore shares at par, the IPO may not attract much investor attention. Reason: The offer is at a high PE multiple and the bank does not have an impressive record. While Times Bank, recently offered 3.5 crore shares at a price-earning multiple of 3.69, Centurion Bank is offering equity shares at a P/E of 5.2. In fact, investors are already suffering heavy capital erosion in some of the other private sector banks which had came out with their IPOs in the recent past like Jammu & Kashmir Bank, UTI Bank, IDBI Bank, City Union Bank and South Indian Bank. This will weigh heavily in the minds of investors. n any case, investors have other investment opportunities as there are 10 bank IPOs already lined up.The overwhelming response to the Times Bank IPO is understandable as the bank offered equity shares at a reasonable price and the bank held lot of promise for the future. Unlike Centurion Bank, Times Bank boasts of an impressive record with many innovative products underits belt. However, Centurion Bank does not have many innovative products. Centurion Bank has also not set any profitability targets for the current fiscal. Times Bank has given a renewed thrust to fee-based income and is targeting an NPA level of 2 per cent. Centurion Bank's net non-performing assets have zoomed from 0.38 per cent in 1998 to 3.73 per cent in 1999, which is very high for a private sector bank. The bank has, however, started monitoring the worsening quality of its assets and has chalked out a NPA management strategic plan for reducing the proportion of NPAs.
Centurion Bank has a paid up capital of Rs 118.72 crore and after the Rs 33.75-crore IPO, its equity will swell to Rs 152.47 crore. Times Bank has a lower paid up capital of Rs 135 crore. Centurion Bank's past performance has not been very impressive. Total income increased from Rs 204.04 crore in fiscal 1998 to Rs 439.17 crore for fiscal 1999 (this includes the 15-month financials of the erstwhile 20th Century Finance Corporation). Netprofit, however, slipped to Rs 21.44 crore from Rs 23.01 crore for fiscal 1998.
Capital adequacy ratio of the bank fell from 20.64 per cent in 1998 to 8.45 per cent in 1999 (close to the mandatory requirement of 8 per cent).Operating profit as a percentage of working funds fell from 2.6 per cent to 1.16 per cent. Return on assets plunged from 1.6 per cent to a low of 0.92 per cent. Profit per employee slipped from Rs 16.64 lakh in 1998 to Rs 4.81 lakh in 1999. Earning per share fell from Rs 2.44 to Rs 1.92. Net asset value improved from Rs 14.47 in 1998 to Rs 15.58 for 1999. However, the bank's return on networth declined from 16.88 per cent to 12.32 per cent. Total assets of the bank increased from Rs 1574 crore for fiscal 1998 to Rs 3104 crore for fiscal 1999 (including assets worth Rs 731 crore transferred from TCFC). Deposits shot up 72 per cent from Rs 1247 crore to Rs 2141 crore and advances (including credit substitute products) registered a growth of 111 per cent from Rs 966 crore to Rs 2040 crore.The bank has introduced products like extended banking hours, 7-day banking, Sunday banking, round-the-clock locker facilities, offsite ATMs, drive-in ATMs, satellite cheques and fast remittances.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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