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Centurion Bank to sell bulk of Ahuja's stake

George Smith Alexander

The board of Centurion Bank has decided to sell 23.12 per cent stake belonging to chief promoter Dev Ahuja to a strategic investor.

Ahuja, who owns these shares through TCFC Finance Ltd, had placed these shares on lien with the bank as part of a financial support agreement in April 1999.

The board had decided at its September meeting to sell off TFL's holdings to a strategic investor. Ahuja has some more stake in the bank through two other companies.

TFL had pledged Ahuja's 23.12 per cent stake with the bank which reserved the right to sell off the holding in case TFL was not able to abide with the terms of the agreement.

According to sources, the company does not want to commit any further resources to the bank and hence the board decided to transfer the stake to a strategic ally, which will lead to the exit of Ahuja as chief promoter. Going by the current market price of Centurion Bank, TFL's holding is valued at Rs 229.3 million.

International Finance Corporation, Washington, which holds an 8 per cent stake in the bank, has already initiated the process of identifying a partner and is reported to be in talks with 2-3 potential investors. IFC has rushed in a team of officials to verify the bank's books of accounts.

Ahuja did not respond to repeated telephone calls at his office. A letter faxed to his office, seeking his comments, also evoked no response. But sources close to the Reserve Bank of India confirmed that the central bank is in the know of the developments.

The central bank has, in fact, suggested the name of former State Bank of India managing director V Janaki Raman as chairman and managing director. Till now, Ahuja was the chairman of the bank.

When the assets of 20th Century Finance Corporation (TCFC), one of the original promoters of the bank, were merged into the bank in 1998, the promoter stake in TCFC was transferred into an investment company, TCFC Finance Limited.

This company-and by extension, the promoters-had capped its liability to a maximum of Rs 400 million to make good the incremental provisioning on account of non-performing assets in the transferred portfolio. The cumulative provisioning till March 31, 2001 was to the tune of Rs 299.2 million.

Ahuja holds this stake though three companies, with TFL holding the largest chunk of 23.12 per cent (36.4 million shares). The other two companies are Century Finance & Consultancy Services Ltd and 20th Century Holdings Pvt Ltd.

At the time of filing its offer letter for a rights issue of Centurion Bank (January 2001), these two companies held 8.70 per cent and 2.47 per cent, respectively. However, subsequently, their holdings have been diluted.

At present, Keppel Bank through Kephinance Investment (Mauritius) Pte Ltd has around 17.5 per cent stake in the bank followed by Asian Development Bank (10.22 per cent) and IFC (8.36 per cent).

Depending on the profile of the strategic investor, IFC and ADB would look at off-loading their stakes while Keppel is open to increasing its stake.

Centurion Bank has a good retail portfolio with a large two-wheeler financing base. Besides, it is also into commercial vehicle financing. It has 55 branches, 11 extension counters and 116 ATMs across the country.

Centurion Bank had been without a MD for six months. Siddarth Sitholey, Development Credit Bank managing director, who was slated to join the bank backed out at the last moment.

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