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Sunday, July 15, 2007

Central Bank sets IPO price band at Rs 85-102/sh

The public sector institution, the Central Bank of India is entering the capital market with an initial public offering (IPO) of 80,000,000 equity shares of Rs 10 each for cash at a price to be decided through a 100% book building process.

The price band for the issue, which opens for subscription on July 24, 2007, and closes on July 27, 2007, has been fixed between Rs 85 per equity share and Rs 102 per equity share. After the issue, the shareholding of the Government of India in the bank will come down to 80.20%.

The issue includes a reservation of 4,000,000 equity shares for eligible employees of the bank and the balance 76,000,000 equity shares would constitute the net issue to the public. The issue will constitute 24.68% of the pre-issue and 19.80% of the post-issue paid-up equity capital of the Bank. The issue has been rated by the credit analysis and research (CARE) as CARE IPO 4 which indicates above the average fundamentals.

At least 60% of the net issue to the public shall be allotted on a proportionate basis to qualified institutional buyers (QIBs), of which 5% shall be available for allocation to Mutual Funds only and the remaining QIB portion shall be available for allocation to all the QIB bidders, including Mutual Funds, subject to valid bids being received at or above the issue price.

Further, not less than 30% of the net issue shall be available for allocation on a proportionate basis to the retail individual bidders and not less than 10% of the net issue shall be available for allocation on a proportionate basis to non-institutional bidders, subject to valid bids being received at or above the issue price.

The issue proceeds will be utilized to augment the capital base of the bank to meet the future capital requirements arising out of the implementation of the Basel II standards and the growth in assets, primarily the loan and investment portfolio due to the growth of the Indian economy and for other general corporate purposes.

Considered to be the third largest Bank in India in respect of number of branches (Source: The Reserve Bank of India’s Report on Trend and Progress of Banking in India, 2005-06) across 27 States and 3 Union Territories, the Central Bank of India, as on March 31, 2007, has a domestic branch network of 3,194 branches comprising 1,341 rural, 759 semi-urban, 575 urban and 519 metropolitan branches. As at March 31, 2007, the Core Banking Solution (“CBS”) had been implemented in 324 branches and 29 extension counters, covering approximately 35.40% of the Bank’s business.

The Bank, currently wholly-owned by the Government of India., is focussing on three main areas: corporate; retail and agriculture. As at March 31, 2007, the Bank had a workforce of 39,055 employees serving over 25 million customers.

The equity shares of the bank are proposed to be listed on the Bombay Stock Exchange and the National Stock Exchange. The book running lead managers to the issue are: ICICI Securities Primary Dealership Limited, Citigroup Global Markets India Private Limited, Enam Financial Consultants Private Limited, IDBI Capital Market Services Limited and Kotak Mahindra Capital Company Limited. Intime Spectrum Registry Ltd is the registrar.

The bank posted growth of 3.96% in net interest income at Rs 2,474.43 crore (Rs 24.74 billion) for FY07. Its net interest margin stood at 3.16%.

Advances grew by 38.18% to Rs 51,795.48 crore and deposits rose by 24.51% to Rs 66,482.65 crore.

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