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Central Bank maiden issue next year

New Delhi, Dec. 6: Central Bank of India will tap the equity markets through an initial public offer (IPO) in the second quarter of 2003-04, chairman Dalbir Singh said.

“Yes, we are scheduled to go public around August-October,” Singh told The Telegraph, but declined to comment on the size of the IPO.

Sources say the size of the issue will be around Rs 350-400 crore. “This will be the target since the bank has done exceedingly well in the current fiscal,” the official said. Recently, Allahabad Bank and Canara Bank raised Rs 100 and Rs 385 crore respectively from the primary market.

The Mumbai-based bank’s profits for the financial year are expected to leap by almost eight to nine times from last year’s (2001-02) profits which stand at a paltry Rs 48 crore.

“The bank has registered a profit of Rs 138 crore for the six months April-September 2002. We hope to clock a profit of around Rs 360-400 crore for the full fiscal,” a senior bank official said.

Singh said the bank is undecided on the share-premium to be charged on each equity share. “The premium charged will depend on then prevailing capital market conditions and the benchmark 30-share Bombay Stock Exchange index.”

Equity analysts say the bank’s better-than-expected performance will enable it to charge a premium on each share. “If they are able to sustain the growth in profits they will be able to charge a premium of Rs 25-35.”

The bank currently has an asset base of Rs 24,000 crore and investments of another Rs 20,000 crore. Its low cost deposits currently hover around 33 per cent of the total deposits whereas the Capital Adequacy Ratio (CAR), the indicator of a bank’s health, currently stands at 11 per cent, above the Reserve Bank of India’s stipulated 9 per cent.

The bank has recently introduced a Flexi-Interest Deposit Scheme where the interest rate will be linked to the bank rate but have a minimum lock-in period of a year.

Explaining the scheme, a bank official said that the interest rate will be a total of the bank rate which is currently at 6.25 per cent plus 0.75 per cent. So the net interest payable to a depositor will be 6.95 per cent.

The official said this scheme is aimed at medium-term depositors since neither depositors nor the banks are keen on long-term deposits in a falling interest rate regime.

The bank has also issued around 800 notices to defaulters on the back of the Securitisation Bill. “Of these, 150 notices amounting to dues around Rs 60 crore have been sent to defaulters based in the Delhi region.”

The recovery will help reduce the bank’s non-performing assets as well as boost profits.

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