The Telegraph
Since 1st March, 1999
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Centurion told to float rights issue

New Delhi, Nov. 9 (PTI): The government has asked Centurion Bank to come out with a rights issue before infusing Sabre Capital Worldwide Inc and other investors infuse Rs 154 crore as foreign direct investment (FDI).

The Foreign Investment Promotion Board (FIPB) turned down the bank’s FDI proposal on the ground that it would temporarily take the overseas holding above the 49 per cent that is currently allowed in banks. Instead, the board has asked the bank to come up with a rights issue or public offer of Rs 65 crore first.

The bank had sought FIPB approval to allow its existing and new investors to bring in a total Rs 219 crore in FDI — Rs 154 crore in the first tranche and another Rs 65 crore through rights issue in the second tranche — to tide over its financial difficulties. The capital infusion would enable the bank to restructure its existing capital and shore up the capital adequacy ratio to beyond 9.0 per cent as stipulated by the Reserve Bank.

Centurion planned to issue shares under rights or public issue at Rs 4.0 per share, which includes a premium of Rs 3 per share.

The bank had sought permission to exceed the FDI limit of 49 per cent, subject to the condition that it would comply with the current norms after the rights issue is completed. At present, the foreign holding is 30.64 per cent, which has been proposed to increase to 61.10 per cent after the infusion of Rs 154 crore from the foreign partners. The FIPB had raised objections to this proposal, saying it was not in consonance with the present FDI limits and government cannot allow the bank to breach the norms for a temporary period.

If the rights issue is floated first, followed by the FDI inflow, the overall foreign holding would remain within the permissible level at 47.81 per cent. Foreign institutional investors are seen to hold is slated to be 11.02 per cent in the proposed equity structure.

The Singapore-based Keppel Bank has a 20 per cent stake in Centurion Bank through KepFinance Investment of Mauritius. International Finance Corporation (IFC), the arm of the World Bank that invests in private projects, has 8.36 per cent; Asian Development Bank has 10.22 per cent of the bank’s equity. Asian Finance and Investment Corp of Philippines, non-resident Indians (NRIs) and foreign institutions have 0.25 per cent and 0.02 per cent.

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