Centurion Bank set to raise Rs 800 cr fresh capital

Centurion Bank of Punjab (CBP) today decided to raise Rs 800 crore of capital through a combination of preferential allotment and an international or a domestic issue of equity.

The bank's board of directors have approved to raise Rs 384 crore through a preferential issue of equity to funds managed by GW Capital, ChrysCapital and Citigroup Venture Capital International Growth Partnership Mauritius. The preferential allotment will be made at Rs 19.25 per equity share.

Another Rs 416 crore will be raised through issue of fresh equity in the domestic or international market. The bank has proposed to make preferential allotment of 70 million equity shares each to funds managed by GW Capital and its affiliates and nominees and ChrysCapital.

It would allot another 59 million equity shares to funds managed by Citigroup Venture Capital International Growth Partnership Mauritius for a consideration of Rs 114 crore.

CBP's managing director, Shailendra Bhandari, said, "When we raised Rs 600 crore last year followed by an ADS issue of Rs 300 crore, we had said that it is for funding our organic growth. Subsequently, we had an inorganic transaction. Hence we perceive the need for future organic and inorganic growth in the coming quarters."

He, however, said "Although, we have not evaluated any target for acquisition, we are always open to inorganic route for growth."

The bank's capital adequacy after the fresh capital raising plans would increase to 17-19 per cent from the current 10.92 per cent. The bank's capital adequacy has fallen from 21.42 at the end of March 2005 due to the impact of the merger.

The bank said the capital raising will provide an impetus to accelerate growth in loan assets over the ensuing quarters. The bank will convene an extra-ordinary general meeting of its shareholders on December 24, 2005 to consider the above capital raising proposals. Ambit Corporate Finance PTE Ltd and SSKI are the financial advisors to the preferential allotments.

Centurion Bank of Punjab has been created from the merger of Bank of Punjab with Centurion Bank with effect from October 1, 2005. The operations of the two banks have been integrated across their entire networks.

The merged entity has decided to put in place a common system and go in for a phased migration to ensure minimum disruption of customer service and operations.