IndusInd Bank has joined the long list of suitors for Centurion Bank which have looked into the book of the bank for a possible takeover.
Earlier, HDFC Bank, Vysya Bank, Bank Muscat and Citibank talked to the bank while Infrastructure Leasing & Financial Services Ltd (IL&FS) had done a due diligence exercise on behalf of IL&FS-AIG sectoral fund. Public sector Andhra Bank too is now talking to Centurion Bank.
IndusInd Bank managing director Bhaskar Ghose said, "We are only taking a preliminary look at the bank. We are not considering appointing a merchant banker at this point of time." The Reserve Bank of India (RBI) is believed to have told Centurion to zero in on a suitor by September.
The bank, which has not yet announced its financial result for fiscal 2002, will make it public by the end of the next month.
Sources said the crucial issue will be pricing. "If it is ready to sell at a discount to the market price, there may not be any problem," said a source. Centurion Bank scrip closed at Rs 8.70 on the Bombay Stock Exchange today. The IndusInd stock closed at Rs 16.20.
"In today's scenario banks are looking at growth through consolidation. We would like to be proactive as an acquirer. We do not want to be isolated and marginalised in the whole game. However, we were looking at a possible acquisition at least six to nine months down the road. We are only looking at this because of the RBI deadline," Ghose said.
According to sources, Andhra Bank has already completed its due diligence and is expected to get back to the bank soon. "Even though it is a listed bank, the government holds a substantial chunk of its equity and it can pick up Centurion Bank if the government wants to rescue it to avoid any systemic problem," sources said.
"Centurion has a well established branch network and we were looking at branch size of 90-100. The branch network and the IT systems of Centurion Bank would be a good fit," added Ghose of IndusInd Bank.
IndusInd Bank has a network of 41 branches along with eight extension counters while Centurion Bank has 59 branches and 18 extension counters.
Both Centurion and IndusInd use the core banking software of 'Midas Kapiti' known as 'Equation'. The capital adequacy ratio (CAR) of IndusInd Bank is currently at around 12.5 per cent and with the merger of its holding company IndusInd Enterprises & Finance (IEFL) with itself, the CAR will go up to 14.1 per cent.
However, even with this high CAR, in the event of a merger, the combined bank's CAR may go down below the RBI's mandated 9 per cent mark. Centurion Bank is expected to post a net loss of over Rs 100 crore and is planning huge provisioning to clean up its balance sheet. The loss will pull down its capital adequacy ratio to 4-5 per cent.
Centurion Bank has a deposit base of around Rs 3,500 crore and advances of around Rs 2,000 crore. IndusInd bank has a deposit base of Rs 8,400 crore and advances of Rs 5,600 crore as on March 31. The retail lending of the bank is at around Rs 300 crore.
Sources added that a Singapore-based foreign fund which was bought in by Asian Development Bank is also looking at the bank besides Andhra Bank.
The major stake holders in the bank include Keppel Bank (around 17.5 per cent) through Kephinance Investment (Mauritius) Pte Ltd, Asian Development Bank (10.22 per cent) and the International Finance Corporation (8.36 per cent). Dev Ahuja, the promoter of the bank, holds around 8.5 per cent stake in the bank.
