State-run Central Bank of India is looking to sell its entire 64.40% stake in its housing finance subsidiary – Cent Bank Home Finance (CBHFL), a top bank official said.
The lender has floated a request for proposal (RFP) for appointing merchant bankers. The shortlisted bankers will help the lender scout for a potential investor to buy its stake in the mortgage financier.
“We plan to exit from Cent Bank Home Finance. The bank already provides housing loans, and so, we feel that there is no need to have a housing finance subsidiary,” Central Bank of India managing director and chief executive officer, Pallav Mohapatra, told PTI.
The bank holds 64.40% in the unlisted housing finance company, while the remaining stake is held by Housing & Urban Development Corporation (HUDCO), Unit Trust of India (UTI) and National Housing Bank (NHB).
The bank is facing operational curbs under the Reserve Bank’s (RBI) prompt corrective action (PCA) framework.
Mohapatra said the process of determining the valuation of the Bhopal-headquartered home finance company will begin as soon as the merchant bankers are appointed.
“Right now, it is difficult to say how much we will be able to realise through this disinvestment. Once the valuation is done, we will be in a better position to assess the amount we can raise. But, we expect a better valuation for CBHFL than its peers as it is a deposit-taking NBFC,” he said.
In 2016, the bank had tried to sell its entire stake in CBHFL, but the deal could not be concluded.
PTI had then reported that another state-run Bank of Baroda had shown interest in buying a majority stake in the mortgage lender. In 2016, the 64 per cent stake sale by the bank in its housing finance subsidiary could have fetched nearly ₹250 crore, experts had said.
CBHFL’s net owned fund stood at ₹111.57 crore as on March 31, 2019. Its advances stood at ₹1270.9 crore while deposits were at ₹482.33 crore as of end March 2019.
During FY19, it reported a net profit of ₹16.28 crore, with earning per share of ₹6.51.
In the April-December 2019, it had reported a net profit of ₹8.92 crore as against ₹9.87 crore in the first nine months of FY19. Its total assets stood at ₹1,390.90 crore in the first nine months of FY20.
CBHFL was incorporated as ‘Apna Ghar Vitta Nigam Ltd’ and was subsequently renamed as ‘Cent Bank Home Finance Ltd’. It commenced operation in June 1991.
The home loan financier has presence in nine states through 18 branches.
Besides the sale of this strategic investment, the city-based lender is also in the talks to sell its 20 per cent stake in Indo Zambia Bank from where it is looking to garner around ₹60 crore.
The other stakeholders in the bank include Bank of India (BoI) and Bank of Baroda (BoB) with 20 per cent stake each, and the Zambian government owning the balance.
“We are in talks with BoB and BoI to buy our stake in the bank,” Mohapatra had told reporters after the announcement of Q3 FY20 results.
The bank is also targeting to raise ₹200 crore in the current quarter by monetising its real estate properties.
In the quarter ended December, the lender reported a net profit of ₹155 crore as against a net loss of ₹718 crore in the year-ago period.
The profitability was achieved due to better recoveries, higher income and reduction in cost, Mohapatra had said.
The bank’s recovery, including sale to asset reconstruction companies stood at ₹1,273 crore. Recovery in written-off accounts was ₹520 crore during Q3 of FY20.
It is expecting a good recovery in some of the stressed accounts such as Religare Finvest, Coastal Energen Ltd and Flexi Tuff in the present quarter.
Gross non-performing assets (NPAs) in the quarter ended December reduced to 19.99% from 20.64%, while net NPAs improved to 9.26% from 10.32% in the year-ago period.
Mohapatra had said he expects net NPAs to come below 6% by the end this fiscal which will help the bank to come out of PCA.
