Central Bank shortlists 5 bankers for IPO

Central Bank of India, a mid-sized Mumbai-based public sector bank, has finalised five merchant bankers for its initial public offer (IPO). The IPO, expected by end-May 2007, is expected to raise around Rs 1,000 crore equity capital.

The bank has received all regulatory clearances for converting about 71 per cent of its large equity base into preference shares. The proposal for conversion of shares, which was stuck at the Reserve Bank of India (RBI), was recently cleared by the government.

The RBI was averse to allowing banks to convert 70 per cent of their equity into preference shares. Earlier, the RBI had sought to put 40 per cent cap on conversion of equity into preference shares.

Central Bank officials said of the Rs 1,124.14 crore equity capital, Rs 800 crore would be converted into preference shares. The conversion will lower the bank's paid-up equity capital to Rs 324.14, which will help the bank price its IPO better as its earnings per share improve.

The bank has appointed IDBI Capital markets, Kotak Securities, ICICI Securities, Citigroup and Enam Financials as the lead book-runners.

The bank is negotiating with the government for the coupon rate on the preference shares. The government wants a floating coupon rate of 100 basis points above the Reserve Bank of India's (RBI) repo rate, which is currently at 7.75 per cent. The RBI lends overnight funds to banks at the repo rate.

Central Bank, which had planned to get listed in the fourth quarter of 2006-07, as on December 31, 2006, had a total business of of Rs 1,21,301 crore, comprising deposits of Rs 74,974 crore and advances of Rs 46,327 crore.