State-run Central Bank of India is looking to sell its entire 64.40 percent 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 percent 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 percent stake sale by the bank in its housing finance subsidiary could have fetched nearly Rs 250 crore, experts had said.
CBHFL's net owned fund stood at Rs 111.57 crore as on March 31, 2019. Its advances stood at Rs 1270.9 crore while deposits were at Rs 482.33 crore as of end March 2019.
During FY19, it reported a net profit of Rs 16.28 crore, with earning per share of Rs 6.51.
In the April-December 2019, it had reported a net profit of Rs 8.92 crore as against Rs 9.87 crore in the first nine months of FY19. Its total assets stood at Rs 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 percent stake in Indo Zambia Bank from where it is looking to garner around Rs 60 crore.
The other stakeholders in the bank include Bank of India (BoI) and Bank of Baroda (BoB) with 20 percent 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 Rs 200 crore in the current quarter by monetising its real estate properties.