Citibank eyes Centurion stake

Srikesh P Menon & Anindita Dey

Mumbai, Jan 3: Citibank is understood to have evinced keen interest in picking up the 26.1 per cent stake in Centurion Bank. The American banking major has already done its due diligence and the recommendations have also been forwarded to its head office for a final view on the matter.

When contacted Centurion Bank director VS Srinivasan said Citibank was one of the contenders for the 26 per cent stake of promoter TCFC Finance and the associates in the bank, but denied of any knowledge on further developments. However, Citibank, declined to respond to a faxed query from this newspaper.

According to merchant banking sources, the deal, if fructifies will be valued between Rs 12-14 per Centurion Bank share. The Centurion scrip closed on Thursday at around Rs 9, around 10 per cent higher than its Wednesday’s close of Rs 8.15. Its volume on the BSE has also went up 22 per cent on Thursday at 2,48,814 from 10,699 on Monday.

The foreign stake in Centurion currently stands at 37 per cent. Thus, any foreign investor can pick up only 12 per cent given the sectoral cap in banking which stands at 40 per cent. Further, a foreign bank having operations in the country can only pick up 20 per cent in a domestic bank.

The main promoters of the bank, Mr Ahuja and TCFC Finance hold 23.1 per cent, and have been unable to fulfill their commitments under their financial support agreement signed with the bank. The International Finance Corporation, one of the three foreign shareholders, apart from the Singapore-based Keppel group and ADB, have already done their due diligence exercices on the bank. IFC was in charge of the whole process of looking for prospective strategic partners.

Earlier, IL&FS has taken a look at the bank’s books for a third party and has even completed its due diligence. Anderson was also believed to have joined the fray to find a partner for Centurion.

It can be recalled that the rights issue floated by Centurion earlier went unsubscribed due to its poor performance on the bourses and the bank had to even refund the money to those who had subscribed to its rights issue, priced at a Rs 2 premium on a face-value of Rs 10.
Meanwhile, former SBI managing director V Janakiraman is soon to take charge as Centurion CMD.