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Centurion may drop Rs 1.28 billion rights issue

BS Banking Bureau

Centurion Bank has decided to call off its Rs 1.28 billion rights issue owing to undersubscription. The bank has already sounded off the Securities and Exchange Board of India in this regard.

The rights issue, which had opened on February 14, was initially slated to close on March 15. However, because of the poor response from retail investors, the float was extended to April 12.The offer was at a premium of Rs 2 per share in the ratio of seven equity shares for every 10 shares.

However, with the share price of the bank now falling to Rs 10.75 on the Bombay Stock Exchange, small investors -- who account for around 30 per cent of the shareholding of the bank -- are least interested in the issue.

According to sources close to the bank, it may allow the rights issue to close on April 12 (in case Sebi does not allow them to call it off prematurely) and subsequently refund the money. Going by the norms, if a rights issue does not get 90 per cent subscription, the money has to be refunded to the investors.

The capital expenditure plans of the bank have now been put on hold because of the hiccup with the issue. The promoter's stake in the bank is around 23.12 per cent, while Keppel Tatlee Bank of Singapore holds another 17.71 per cent.

TCFC Finance, the promoter of the bank, along with Keppel, were supposed to pick up the unsubscribed portion. Market sources said that this would not be possible as the promoter would not be able to bring in money to that extent. The other major promoters of the bank are Asian Development Bank, Manila, and International Finance Corporation, Washington.

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