However, market sources said that with TimesBank tapping the market recently with an at-par issue, Centurion Bank would have found it difficult to break the precedent.

The new generation private sector bank is making an initial public offer (IPO) of 3,37,50,000 equity shares of Rs 10 each at par, aggregating to Rs 33.75 crore. The issue will open for public subscription on September 20, 1999 and the shares will be listed on Mangalore, Mumbai and National Stock Exchange by the first week of November.

"Centurion Bank may also come out with a tier-IIcapital issue of around Rs 50 crore by the end of the current fiscal," Srinivasan said.

Centurion Bank was promoted by 20th Century Finance Corporation Ltd (TCFC), -- which has since amalgamated with the bank -- in association with Keppel Tatlee Bank of Singapore and has equity participation from International Finance Corporation (IFC) and Asian Development Bank (ADB).

"The bank would have made the public issue earlier but for the amalgamation of TCFC with the bank last year which has helped the bank to expand its branch network significantly," Centurion Bank chairman DN Ghosh said. The bank's capital adequacy ratio would go up by about one per cent to 9.3 per cent after the public issue.

"The post-issue stake of TCFC Finance Ltd, Keppel Bank, IFC and ADB will go down to 23.12 per cent, 17.71 per cent, 8.36 per cent and 10.22 per cent respectively," Ghosh said.

Centurion Bank's total assets stood at Rs 3,104 crore as on March 31, 1999, with deposits at Rs 2,141 crore, investments at Rs 949 crore andadvances including leased assets at Rs 1,553 crore. The bank's net non-performing assets (NPAs) was 3.73 per cent as on March 31 as against 0.38 per cent in the previous year.

The private sector bank has positioned itself with a thrust in retail banking and treasury while retaining its focus in the core corporate business, global banking, transaction processing services including cash management services and capital market products.

It is in the process of restructuring its treasury and investment business and has also drawn up plans to shortly launch a debit card and a co-branded credit card, apart from joining the Visa, MasterCard and Swadhan card networks.

Insight

The track record

The TimesBank IPO was the first one among the banks with a track record to be priced at par. Now comes Centurion Bank. The move from the bank was an inevitable one given the still hesistant market sentiment for bank stocks. Market sentiment for bank stocks is feeble partly due to the fact that most of thenew generation banks will be tapping the equity markets to shore up desperately needed tier-I capital.

But specifically in Centurion Bank's case, pricing the issue very low also has to do with the fact that the bank that once had the lowest NPAs amongst the new private banks, has seen a dramatic increase in NPAs in just one year. Priced any higher, it probably would not find takers easily. The reason being that if the networth was adjusted for the huge NPAs it would wipe out reserves and a portion of the base capital as well. Besides as a result of the amalgamation of TCFCs leasing and hire purchase business, there has been a sharp increase in risk weighted assets and a fall in the capital adequacy ratio to dangerous levels.

Aaron Chaze