Talwar: Pulling it off

Mumbai, April 23: In one of the most innovative deals in the domestic private banking sector, a group of investors led by Rana Talwar’s Sabre Capital Worldwide is stepping in to resuscitate Centurion Bank by infusing Rs 129 crore for a 48 per cent equity stake and management control in the bank.

The proposal will see the equity holdings of the investor group led by Sabre go up to over 65 per cent by 2006.

The deal envisages Tier I capital infusion of Rs 319 crore in two phases — Rs 219 crore in the first phase and Rs 100 crore in the second phase. Of the Rs 219 crore, Rs 129 crore will be brought in by the Sabre investor group.

This infusion will be at a price of Rs 4 per share and will ensure that the bank meets the mandatory capital adequacy requirements. However, close to 40 million shares, representing 2 per cent of the bank’s capital, will be issued to members of Sabre at Re 1 per share.

“I feel particularly happy that the first deal done by Sabre is in India. Over the next three to five years, we will build Centurion Bank into a leading private sector bank in the country with a focus on retail, consumer banking and trade finance,” said Rana Talwar, former group chief executive of Standard Chartered Plc and executive vice-president and policy committee member of Citicorp.

Of the Rs 129 crore, Sabre will infuse Rs 4 crore and a branch of Gulf-based foreign bank in India (BankMuscat) with about Rs 75 crore valuation would be merged with Centurion Bank.

Many non-resident Indians and FIIs want to join Sabre for an investment in Centurion Bank, he said, adding the first phase of capital infusion was expected to be completed by end of 2003-04.

The other existing shareholders of Centurion Bank like Asian Development Bank and Keppel Bank are also expected to invest Rs 25 crore. Moreover, a rights-cum-public issue is being contemplated which will rake in Rs 65 crore. The issue will also be priced at Rs 4 per share, Talwar added.

Apart from the infusion, there are plans to bring down the equity capital of the bank. During the first phase, the capital of Centurion Bank would be reduced from Rs 152.27 crore to Rs 72 crore. Officials, however, added that they have not yet decided on bringing down the face value of the bank's share to either Re 1 per share or Rs 4 per share.

Following this, a second phase of capital infusion of Rs 100 crore after two years is being planned at terms to be determined at the appropriate time, officials said. This infusion is expected to support the bank’s growth.

In the meantime, until all necessary formalities are completion, Sabre will assist the bank in putting together a management team under a new CEO. While V Janakiraman, chairman and managing director of Centurion Bank, will continue until all regulatory approvals are in place, Talwar is expected to take over as chairman consequently.

After phase I, ADB and Keppel Bank’s 36 per cent stake in the bank which will come down to 16 per cent while the public holding will come down to 30 per cent from 37 per cent.