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Vysya Bank joins Centurion race

George Smith Alexander & Tamal Bandyopadhyay

The Bangalore-based Vysya Bank, itself a takeover target of a foreign bank, has thrown its hat into the ring for a stake in Centurion Bank.

Vysya joins Citibank, Infrastructure Leasing & Financial Services Ltd, HSBC and Bank Muscat, which are interested in buying out Centurion Bank promoter Dev Ahuja's 26 per cent stake in the bank held through TCFC Finance Ltd. However, none of the banks has yet put in a formal bid.

Vysya Bank deputy managing director Bart Hellemans, an executive of Bank Brussels Lambert, declined to comment on the development.

Centurion Bank managing director and chairman V Jankiraman did not deny that the bank was negotiating to sell the 26 per cent stake, but refused to comment on the profile of the suitors.

"We are expecting bids within a month. You must appreciate that we have signed a confidentiality agreement and cannot discuss anything," he said.

Bank Brussels Lambert in January proposed to raise its stake in the equity of Vysya Bank. This was the first attempt by a foreign bank to take over management control of an Indian bank.

Vysya Bank's decision to join the race for Centurion Bank is also the first attempt by an old private sector bank to pick up stakes in a new-generation bank.

Last year, ICICI Bank took over Bank of Madura, thereby becoming the first new-generation private bank to pick up an old bank. If Vysya succeeds in picking up a stake in Centurion Bank, it will reverse the trend.

Sources said a Vysya Bank team came to the Centurion Bank headquarters to look at the books. However, Vysya Bank has yet not reverted to Centurion Bank with a formal proposal.

"It might not have made up its mind in the light of the recent development because Bank Brussels Lambert, a wholly owned subsidiary of ING Barings, now wants to acquire management control from the existing management group (G M Rao, other directors, their friends, relatives and associates)," sources said.

Centurion Bank expects formal bids by the end of this month and the deal is likely to be struck next month. The bank is in need of fresh capital otherwise it may end up posting a capital adequacy ratio of less than 9 per cent at the end of the current financial year. It has pared its balance sheet size from Rs 57 billion in March 2001 to about Rs 43 billion now.

Citibank, which has finished its due diligence, seems serious about Centurion Bank after the government allowed up to 49 per cent foreign direct investment in Indian banks. So does IL&FS, which has taken up the exercise on behalf of the IL&FS-AIG sectoral fund.

The selling points of Centurion Bank are its 57 branches, 15 extension counters, 120 ATMs, a good technology platform and its retail customer base, both on the liabilities as well as the assets sides.

It also has the network of 45 TCFC marketing offices that serve as client servicing offices for its two-wheeler and commercial vehicles portfolio.

In Vysya Bank, the promoters hold 27 per cent, International Finance Corporation, Washington, holds 10 per cent and Bank Brussels Lambert 20 per cent, with the rest being held by the public.

Bank Brussels Lambert increased its stake in the bank from 9 per cent to 20 per cent in November 2000. In Centurion Bank, Kepple Bank of Singapore, International Finance Corporation, and Asian Development Band collectively hold a 35 per cent stake.

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