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ENS ECONOMIC BUREAU
MUMBAI, Nov 4: The board of directors of 20th Century Finance Corporation Ltd (TCFC) and Centurion Bank Ltd (CBL) have approved the scheme of amalgamation for the merger of TCFC's operating business with the Bank while the investment business has been hived off into a separate subsidiary -- TCFC Finance Ltd.
As per the plan, TCFC shareholders will get one share of Centurion Bank for every share held after the demerger of TCFC's subsidiary -- TCFC Finance. The 35 per cent stake of TCFC in CBL will be transferred to TCFC Finance. Besides, TCFC shareholders will get one equity share of Rs 10 each in CBL for every one share of TCFC held by them.
The merger plan, which was approved by the boards of TCFC and CBL, stipulates that shareholders of TCFC will also receive six fully paid up equity shares of Rs 10 each in TCFC Finance for every 10 equity shares held by them.
Thus, CBL will be issuing equity shares of Rs 17.47 crore to the shareholders of TCFC while TCFC itself will cease to exist after the wholemerger exercise is complete.
Company says that the value of shareholders will be considerably enhanced for both the Bank as well as TCFC. Each shareholder of TCFC will get six shares of TCFC Finance Ltd for 10 equity shares in TCFC alongwith one share of the bank for every one share of TCFC.
After the restructuring, TCFC's shareholding of 99.98 per cent in its subsidiary, TCFC Finance, would stand cancelled with immediate effect. Since shareholders will be issued six shares of TCFC Finance for every 10 shares of TCFC held by them, the capital base of TCFC Finance after the demerger would stand at Rs 10.48 crore, ie, 60 per cent of the Rs 17.47 crore paid-up capital of TCFC.
The Reserve Bank of India has conveyed its "in-principle" approval to Centurion Bank for taking over the operating business of TCFC. As a result of the merger, CBL will be acquiring the entire corporate, lease and hire-purchase portfolio as well as consumer finance business of TCFC. All assets and liabilities, branches, manpower andtechnology infrastructure will also be taken over by the bank.
Centurion Bank had, in August, announced that it would take over the operating business of TCFC after getting approval from the concerned authorities.
Sources say that a major portion of TCFC's assets are doubtful in nature owing to its large exposure to equipment leasing. Of the total leased asset portfolio of Rs 517 crore as on December, 1997, leased plant and machinery accounted for more than 50 per cent at Rs 321 crore. Although official estimates of NPAs in TCFC may be low, insiders say that any stringent valuation may reveal a much eroded net worth.
Commenting on the merger, D N Ghosh, Chairman, Centurion Bank said: ``This merger will establish CBL as a major player in the consumer finance market with significant asset addition also in the corporate finance segment. The strong access to low cost funding that centurion bank has, coupled with the high growth-high margin retail financing business that TCFC is involved in, provides astrong foundation for a consolidated operation.''
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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