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Updated: Federal Bank has today informed the stock exchanges that it has acquired 4.99 per cent stake in Catholic Syrian Bank, without revealing any other details.
There seems to be a consolidation in the offing in Kerala’s banking industry. As a precursor to a complete buyout, Aluva-based Federal Bank, one of Kerala’s most well known banks, has bought a 5 per cent stake in Thrissur-headquartered Catholic Syrian Bank (CSB), The Economic Times has reported. The publicly listed Federal Bank plans to acquire the privately held CSB fully if its talks with CSB shareholders succeeds.
Federal Bank has reportedly acquired the 5 per cent stake at Rs 250-300 per share. Interestingly, last year, three private equity funds had picked up a total of 14 per cent stake in CSB for Rs 33 crore. AIF Capital (5 per cent), Gartmore and Siguler Guff (4 per cent each) had bought the stake at Rs 190 per share.
According to the report, Federal Bank has initiated talks with Chawlas, the NRI family, which is the single largest shareholder group in CSB. The proposed deal is in the wake of Reserve Bank of India allowing last week the Chawlas to subscribe to a rights issue of CSB. The Chawlas have already sold 5 per cent to Federal Bank. With the rights subscription, Chawlas’ stake would be 27 per cent. The report adds that RBI can give a formal go-ahead to a merger of the two banks once the CSB board considers the proposal.
The other shareholders in CSB like TS Anantharaman and his associates and some of the private equity funds which had last year picked up a 14 per cent stake may look at exiting, the report adds. The proposed merger will make the combined entity stronger in branch presence. It will have 964 branches (603 of Federal Bank and 361 of CSB).
The South Advantage
Yes Bank, India’s newest private bank, is also on the look out for acquisitions and has told media that they are evaluating opportunities in the Southern region. In December 2006, Centurion Bank of Punjab acquired Lord Krishna Bank of Cochin. In 2004, Oriental Bank of Commerce picked up GTB (Global Trust Bank) in Hyderabad and in 2002, Punjab National bank took over Nedungadi Bank in Kerala.
Now the question is will Yes Bank enter the fray for CSB.
Earlier this year, in one of the largest merger in the India banking industry, HDFC Bank merged with Centurion Bank of Punjab (now renamed as HDFC Bank) in a deal worth Rs 9,526 crore ($2.38 billion) which made it the third largest bank and second largest in branches.