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CBI plans IPO for home finance unit

Central Bank of India is proposing an IPO for its housing finance subsidiary Centbank Home Finance. The bank intends to dilute its stake in the subsidiary. Although it is a subsidiary of the bank, outside investors including HUDCO, UTI and National Housing Bank together own 35% stake in it. The date of listing will be decided by the bank after consultation with the minority shareholders. The bank had infused Rs 4.2 crore capital in the home finance arm in 2014. However, given the pressure on the bank’s earnings, no allocation was made in 2015. According to Rajeev Rishi, CMD of the bank, the bank would first expand the book of the home finance company before the listing in order to obtain a better valuation. The bank, said Rishi, is growing the home loan book as part of its strategy to derisk the portfolio. Since home loans are all secured there is not much credit risk, he added.
The bank requires Rs 3000 crore capital this year and plans to raise the same from the government and through the qualified institutional placement route. Rishi said the bank is expecting Rs 1,500 crore from the government and the rest would be from internal accruals and may be from the market. Rishi said the bank would rather go for a QIP route to meet its capital requirement. The bank has already appointed three merchant bankers – SBI Capital Markets, IDBI Capital and ICICI Securities – for the QIP.

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