ADBL shares oversubscribed

The primary issue of Agricultural Development Bank Ltd (ADBL) has already been oversubscribed by over one-and-a-half times.

"Till today afternoon, we received 55,000 applications worth Rs 1.40 billion," said Siddhanta Raj Pandey, chief executive officer of Ace Development Bank -- the issue manager of the largest public issue in the history of Nepal's capital market.

ADBL has floated 9.6 million units of shares -- worth Rs 960 million -- at a face value of Rs 100 per unit from Sunday. "Due to oversubscription, it will be closed by Wednesday evening," said Shyam Singh Pandey, chief executive officer of ADBL that has floated the primary issue in a volume equal to that of three commercial banks combined.

The overwhelming collection of the money could ease liquidity crunch a little, if it has come out of the banking channel as it is suspected that urban cooperatives and people have huge cash that they invest on shares or on reality sector.

"Urban cooperatives are involved in lending for shares at high interest rates, putting the norms of cooperatives at stake," said an investor, who himself has borrowed Rs 200,000 from a cooperative at high interest rates to apply for the ADBL shares.

Normally, commercial banks have been issuing primary shares worth Rs 300 million as directed by Nepal Rastra Bank (NRB). The rule is that a commercial bank has to issue 30 per cent primary shares of the total paid-up capital.

ADBL -- a development bank turned 18th commercial bank -- will have Rs 3.20 billion paid-up capital after this issue.

"Despite poor performance of the secondary market at present and liquidity crunch, there is enormous demand in the market," Pandey said adding that there has been encouraging participation in the districts but that the collection was more in the valley.

ADBL's strength is its network, which is the largest one among banks. However, it has to introduce new technology and operate efficiently if it wants to compete with them as the other banks are more efficient and tech-savvy.

On the other hand, being a government bank, political intereference and frequent change of CEOs would also have negative impact on ADBL's financial health in the long run.