Centurion plans pref issue

Post-issue, Bank Muscat, India Advantage Fund to have 5.76% and 4.55% stake.

Centurion Bank of Punjab (CBoP), a small-size private sector bank, will raise a minimum of Rs 417 crore through preferential allotment to Bank Muscat and India Advantage Fund, at a price not less than Rs 24.54 a share, to maintain a strong capital position after its proposed merger with Lord Krishna Bank (LKB).

Bank Muscat would be allotted 9.50 crore shares, amounting to a 5.76 per cent stake post-issue. India Advantage Fund would be allotted 7.50 crore shares, which would translate into a stake of 4.55 per cent.

The bank will seek shareholders' approval to the preferential allotment at an extraordinary general meeting on September 30, primarily convened to consider the amalgamation of LKB with the bank.

The share-swap ratio for the amalgamation has been fixed at seven equity shares (of Re 1 each) of CBoP for every five equity shares (of Rs 10 each) of the unlisted LKB.

The bank said there will be no change in the board of directors nor will there be any change in the control over the bank, consequent to the preferential allotment.

The preferential allotment would be done within 15 days of the approval of the resolution by the shareholders, the bank said in a notice to the shareholders.

The merger of CBoP and LKB would be subject to the sanction of the Reserve Bank of India (RBI) under the Banking Regulations Act, 1949.

The bank, in the explanatory notes, has said the amalgamation would enable the merged entity to increase its retail customer base, enhancing opportunities for cross-selling of banking and financial services and products.

CBoP has also proposed to increase the strength of its board of directors to 15 from the current 12. The bank will not be able to reconstitute its board by appointing additional directors in view of the amalgamation of LKB, as it will need to carry out necessary amendments to its Articles of Association.

Any increase in the number of directors beyond 12 would be subject to the approval by the shareholders and subsequent approval of the central government.