Share transactions to be suspended only for 15 days

After the investors’ pressure, the regulatory authority of the capital market has decided to shorten the duration of suspension of share transactions of companies in the process of merger and acquisition (M&A) to only 15 days.

The Securities Board of Nepal (Sebon) today issued a directive clearly mentioning that the share transactions will be suspended for a maximum of 15 working days for the completion of the M&A process that include re-registration of securities, dematerialisation and listing of securities.

The directives has formed a unified policy for all companies listed in the secondary market with the new directives, though there was a policy for trading suspension only for banks and financial institutions (BFIs) earlier.

Enforcing the directive from today, Sebon has maintained that the share transaction will be suspended for a maximum of 15 working days after the unified entity starts joint business transaction.

Investors have been suffering as they had to wait for a longer period of time for buying and selling of shares – especially the BFIs shares – that are in M&A process. As the Sebon scrapped the provision to hold share transactions of the companies, which enter the process for M&A, the new rule will give some respite to the investors, who were unable to purchase and sell their stakes for a long time until the unification process completed.

The regulator has given 15 days also for re-registration, reconciliation, dematerialisation and listing of the shares for post unification.

Earlier, the central bank has authorised Sebon to decide on the suspension of share trading of BFIs opting for M&A. Amending the Regulation for Merger and Acquisition of Banks and Financial Institutions 2073 last month – according to the announcement in the Monetary Policy for the current fiscal year – the central bank has given the right to decide on the suspension of share trading to Sebon. 

The central bank has become flexible after increasing complaints that the suspension of share trading in the secondary market for a long time during M&A adversely affected the investors.

Sebon directs Reliable to launch rights issue before getting acquired

Securities Board of Nepal (Sebon) – the capital market regulator – has asked Reliable Development Bank to launch rights issue before it is acquired by the Global IME Bank.
Reliable's 10th Annual General Meeting (AGM) held on July 1 had approved 1:1 rights shares and 10 per cent bonus share from the net profit earned in the last fiscal year.
Instead of launching rights issue, the development bank, however, had signed a Memorandum of Understanding (MoU) for its acquisition by the Global IME Bank.
"The beginning of acquisition process without distributing rights shares would hurt investors," Sebon said in a statement issued today.
The regulator also directed the national-level development bank registered in Kathmandu to launch rights issue before the acquisition as failure to do so would be against the interest of investors who bought the development bank's shares in anticipation of rights and bonus shares.
"Since the decision was price-sensitive and approved by the AGM, Reliable Development Bank cannot avoid its AGM's decision," the Sebon said in the statement.
Earlier on October 1, Global IME Bank chairman Chandra Dhakal and Reliable chairman Radhe Shyam Agrawal had signed the MoU on behalf of their respective organisations to complete the acquisition process within three months.
The Board is also planning to enforce a regulation that will bar listed companies from taking multiple corporate actions at once to rein in activities that could influence the capital market and hurt the interest of investors.
"If implemented, this regulation will prevent listed companies from reversing some of the crucial decisions made in the past," according to the capital market regulator that is mulling over introducing such a provision after a number of listed companies jumped in to roll out future plans without accomplishing the ongoing task.
According to the Sebon spokesperson Niraj Giri, the move is aimed at safeguarding the investors’ interest. "Sebon is also planning to enforce a code of conduct to discipline companies engaged in insider trading," he added.

Sebon directs Reliable to launch rights issue before getting acquired

Securities Board of Nepal (Sebon) – the capital market regulator – has asked Reliable Development Bank to launch rights issue before it is acquired by the Global IME Bank.
Reliable's 10th Annual General Meeting (AGM) held on July 1 had approved 1:1 rights shares and 10 per cent bonus share from the net profit earned in the last fiscal year.
Instead of launching rights issue, the development bank, however, had signed a Memorandum of Understanding (MoU) for its acquisition by the Global IME Bank.
"The beginning of acquisition process without distributing rights shares would hurt investors," Sebon said in a statement issued today.
The regulator also directed the national-level development bank registered in Kathmandu to launch rights issue before the acquisition as failure to do so would be against the interest of investors who bought the development bank's shares in anticipation of rights and bonus shares.
"Since the decision was price-sensitive and approved by the AGM, Reliable Development Bank cannot avoid its AGM's decision," the Sebon said in the statement.
Earlier on October 1, Global IME Bank chairman Chandra Dhakal and Reliable chairman Radhe Shyam Agrawal had signed the MoU on behalf of their respective organisations to complete the acquisition process within three months.
The Board is also planning to enforce a regulation that will bar listed companies from taking multiple corporate actions at once to rein in activities that could influence the capital market and hurt the interest of investors.
"If implemented, this regulation will prevent listed companies from reversing some of the crucial decisions made in the past," according to the capital market regulator that is mulling over introducing such a provision after a number of listed companies jumped in to roll out future plans without accomplishing the ongoing task.
According to the Sebon spokesperson Niraj Giri, the move is aimed at safeguarding the investors’ interest. "Sebon is also planning to enforce a code of conduct to discipline companies engaged in insider trading," he added.

Global IME acquires Social Development Bank, Gulmi Development Bank

Financial institutions should merge after testing their compatibility and transactions of each other‚ suggested central bank governor Dr Yubaraj Khatiwada, addressing an inaugural of a new merged financial entity between Global IME Bank and two development banks.

They should check each other’s strengths and weaknesses‚ and be well informed of their  lending portfolio and client base before deciding to merge‚” he said.

Apart from Due Diligence Audit (DDA), the financial institutions should also conduct staff audit, the governor suggested.

As the central bank has not yet brought acquisition regulation, the two development banks – Social Development Bank and Gulmi Bikas Bank – have been merged with the Global IME Bank — that was formed last year after a merger between a commercial bank Global Bank and two finance companies, IME Financial Institution and Lord Buddha Finance, though it is rather acquisition of the two development banks by Global IME Bank.

Global IME Bank’s merger with the two development banks was finalised in May but it could finalise last week after the central bank and  Office of Company Registrar’s green signal.

The Due Diligence Audit had fixed Gulmi Bikas Bank and Social Development Bank’s share swap ratio at Rs 50 and Rs 40 for each Global IME share at Rs 100.

The bank’s capital fund will stand at Rs 3.45 billion with 64 branch networks
across the country after the merger. The deposit base will be Rs 32 billion and lending has gone up to Rs 26 billion, after the merger.
“Though Global Bank was established as the 19th commercial bank of the country, it has become one of the top 10 large banks in terms of capital and have
the widest branch network among private banks after the merger‚” said chairman of the bank Chandra Dhakal.

Government to help open liaison office abroad: PM

The government will help domestic banks open their liaison office abroad as it will help them bring in the remittance through formal channel.
However, the banks should provide loans to productive sector from the remittance inflow, said caretaker Prime Minister Dr Baburam Bhattarai inaugurating Global IME Bank here today.
The remittance inflow into the country has been encouraging but it has to be utlised in the productive sector, he said, adding that the merger among the banks and financial institutions will help provide enough capital at the transition period, when the country is moving towards capitalist industrial economy from the traditional agriculture.
Without economic development and prosperity, the democracy cannot sustain for a long time, the caretaker premier said. "And development is not possible without private sector. Similarly, without investment infrastructure development is not possible."
However, current trend of politics on poor people will be short lived and instead the political parties must do politics based on development, he suggested.
"The increased number of banks and financial institutions in a small economy like Nepal has channeled investment towards unproductive sectors due to rising and unhealthy competition," said caretaker finance minister Barshaman Pun.
The more the number of banks and financial institutions, the harder it is for the regulator to regulate them," he said, adding that the banks and financial institutions have also urban-centric due to pressure.
Merger is also key to generate big capital base and invest on big infrastructure projects, said central bank governor Dr Yubraj Khatiwada on the occasion.
"To solve the current problem of assets-liability mis-match that has hit the banks and financial institutions lately, the government has asked the multilateral donors to float local current bonds, he informed, adding that it will help banks and financial institutions to invest on long-term infrastructure projects.

Global IME Bank operational
KATHMANDU: Global Bank, IME Financial Institution and Lord Buddha Finance merged to become the Global IME Bank that started its operation from Monday. "Global IME Bank Ltd has become the biggest merger in banking history by completing merger process within short span of time," according to the banks chairman Chandra Prasad Dhakal. Global IME Bank has 62 branches, two extension counters and 57 ATMs network throughout the country, he said, adding that it is the seventh bank in Nepal to issue Visa Credit Card. After the merger, Global IME Bank has made its presence in 13 zones of Nepal and is confident to extend its service network through the country, Dhakal added. "It has a total paid up capital of Rs 2.18 billion with a deposit base of Rs 26 billion, loans worth Rs 20 billion and more than 255,000 customers.

 

Former king’s move will help political parties forge consensus: PM

The current 'move' of the former king Ganendra Shah will help forge consensus among the political parties despite their differences, according to the caretaker Prime Minister Dr Baburam Bhattarai.
Thanking the former king for his coup on February 14, 2005 that helped forge the consensus among the political parties, the premier inaugurating the Global IME Bank here today said that the the former king should understand that his such move will only help political parties to reunite like in 2005.
Bhattarai also warned former king of stripping all the state facilities. "The political parties will have to rethink on his state facilities, if he tries to act smart," he said, adding that as the head of the government, he will take the lead to do so.
"The resurrection of monarchy is impossible as the wheels of time could not be turned back," Bhattarai said.
The former king had in his televised interview yesterday questioned the ability of the political parties in delivering the public what they had promised.
"We might have failed to deliver but there is no difference among the political parties that the country should remain republic and any act against it will not be tolerable," according to the caretaker prime minister, who has declared election on November 22, due to May 27 death of Constituent Assembly that failed to promulgate Constitution even after four years.
The former king had in the interview floated the idea of comeback as a guardian. "It seems former king has not yet learnt lesson,” he said.

Vibor, Bhajuratna merger by fiscal year end

The merger process of Vibor Bikas Bank and Bhajuratna Finance and Savings is going to complete within this fiscal year.
"We are planning to operate as a merged entity within this fiscal year," said chief executive of Vibor Bikas Bank Ajaya Ghimire."After the central bank's Letter of Intent (LoI) last week, the merger of Vibor Development Bank and Bhajuratna Finance and Savings has gathered momentum," he said, adding that the merged entity will be called Vibor Bikas Bank.
The merger will help Vibor to channel its energy towards more innovation and growth and also make one of the oldest business group in the country — Jyoti Group — more visible in the financial sector.
The development bank that faced an acute cash crunch last year has come out of its crisis currently, he said, adding that it has paid central bank and other banks and financial institutions back and is secure now, Ghimire, added.
"However, we will be looking for more partners to merge as the more stronger capital base will give Vibor more room for growth," he said, without elaborating on its prospective partners. "We are talking to many informally."
The merged entity will have a paid-up capital of Rs 1.36 billion, Ghimire said, adding that it will also raise additional Rs 208.9 million by inducting new strategic partners and merging with other institutions.
The structure of the new board of directors in the merged entity will have two directors each from Vibor and general share holders, one each from Bhajuratna and other merger or strategic partner entity, and one independent director. The bank is planning to maintain 61:39 promoter-public share ratio after merger or rights offerings.
"We remained on a low profile due to central bank's changed regulatory norms, but merger with Vibor will help us grow now," director of Bhajuratna Dr Roop Jyoti said, adding that the merger is a win-win proposition.
Vibor has listed 6,800,000 unit shares with a face value of Rs 100 per unit in Nepal Stock Exchange and its share was traded at Rs 112 on December 12, 2011, whereas Bhajuratna Finance and Saving has listed 561,602 units of shares at a face value of Rs 100 and it was last traded at Rs 116 on November 27, 2011.
Vibor was forced to merge with Bhajuratna after it was unable to repay the depositors due to cash crunch. The central bank while offering it a rescue package of Rs 500 million under 'lender of last resort' facility, has also made it commit on merger.

FDI inflows to South Asia rise by one-third

South Asia received Foreign Direct Investment (FDI) inflows of around $43 billion last year.
South Asia, East Asia and South-East Asia received inflows of around $43 billion, $209 billion, and $92 billion, respectively, according to UNCTAD’s Global Investment Trends Monitor that was released today.
"FDI flows to developing Asia, excluding West Asia, rose by 11 per cent in 2011, despite a slowing down in the latter part of the year," it said, adding that with a 16 per cent increase, South-East Asia continued to outperform East Asia in growth of FDI, while South Asia saw its inflows rise by one-third after a slide in 2010. FDI to China rose by eight per cent to an estimated $124 billion ($116 billion in the non-financial sector) as a result of increasing flows to non-financial services, though FDI growth in the country slowed down in the last two months of 2011.
"Despite turmoil in the world economy, global FDI inflows rose by 17 per cent in 2011 to $1.5 trillion, surpassing their pre-crisis average, based on preliminary UNCTAD estimates," the organisation said. "FDI inflows increased in all major economic groupings - developed, developing and transition economies."
Developing and transition countries continued to account for half of global FDI in 2011 as their inflows reached a new record high, driven mainly by investments in Latin America (up by 35 per cent) and in transition economies (up by 31 per cent), it said, adding that Africa — the region with the highest number least developed countries — continued to experience a decline in FDI.
UNCTAD estimated that FDI flows will climb moderately in 2012 to around $1.6 trillion, but will remain short of the all-time peak of $2 trillion reached in 2007. However, the organisation said the fragile recovery of the world economy in 2011 – with growth tempered by the debt crisis in developed countries, the uncertainties surrounding the future of the euro, and rising financial market turbulence – will have an impact on FDI flows in 2012.
Both cross-border mergers and acquisitions and greenfield investments slipped in the last quarter of 2011, UNCTAD figures indicated. "All these factors suggest that significant risks and uncertainties for further FDI growth in 2012 remain in place."
During 2011, many countries continued to implement policy changes aimed at further liberalising and facilitating FDI entry and operations, but also introduced new measures regulating FDI, according to the UNCTAD’s global FDI quarterly index that remained steady during 2011, underscoring the increased stability of flows witnessed during the year.
Unlike foreign portfolio flows that have dramatically started to decline in the third quarter of 2011, FDI flows maintained their upward trends at least until this period.
However, as preliminary data from cross-border Merger and Acquisitions (M&A) and greenfield investment projects suggest, FDI flows are expected to slow down in the fourth quarter of 2011.

Central bank gives nod to more mergers

The merger of development banks and finance companies are gaining momentum as the central bank has approved the merger of three more sets of financial institutions.
Nepal Rastra Bank (NRB) board meeting today issued Letter of Intent (LoI) for the merger of Banepa-based Annapurna Development Bank and Kathmandu-based Suryadarshan Finance, Pokhara-based Business Development Bank and Kathmandu-based Universal Finance and Banepa-based Pashupati Development Bank and Kathmandu-based Lord Buddha Finance.
Following the merger, the merged entity will operate as national level development banks as per the central bank's regulation. The biggest incentive for the class 'B' and 'C' financial institutions is the viability for the upgradation to national level financial institutions.
Two weeks ago, the central bank had issued similar LoI to the merger of Swastik Merchant Finance and Infrastructure Development Bank.
After getting LoI from the central bank, Special General Meeting of the financial institutions need to endorse the decision. As the general meetings of the financial institutions have green signaled to the mergers, now, they have to apply to the Company Registrar Office and central bank for the merger and upgradation with necessary documents and infrastructures.
The merger among class 'C' and 'D' financial institutions has gained quite a momentum in recent times. According to the NRB, there are more than 30 financial institutions holding talks about getting merged.
The beginning of the year 2011 saw the merger of Nepal Sri Lanka Merchant Banking and Finance into Nepal Bangladesh Bank Ltd. Himchuli Bikas Bank and Birgunj Finance also got merged four months back into national level H and B Development Bank. NRB has been prescribing merger as the solution to most of the financial institutions that are in difficulty since last year. The growing numbers of banks and financial institutions in the size of market has considered being unsustainable for the overall financial sector thus merger of the banks and financial institutions has been referred as the best measure for long term financial stability and competitive financial sector.

Birgunj Finance, Himchuli Bikas Bank to merge

This is the season of merger.
Two more financial institutions -- Kathmandu-based Birgunj Finance Ltd and Pokhara-based Himchuli Bikas Bank -- announced their proposed merger become a national level development bank.
"We are merging the two finance companies in line with the central bank's vision of consolidating the financial institutions," said executive chairman of Birgunj Finance Bijay Kumar Sarabagi, after signing the Merger Memorandum of Understanding (MoU) here in the Valley today.
The central bank and the government both encouraged the banks and financial institutions for merger in their monetary policy and fiscal policy.
"The merger is supposed to facilitate the capital requirement of the financial institutions and reduce their operational costs as well creating space in the crowded financial institutions," according to the Monetary Policy for the current fiscal year 2010-11.
Similarly, the budget for the fiscal year 2010-11 has also encouraged the merger of the banks and financial institutions by providing them incentives, though some banks and financial institutions are less inclined to mergers due to less incentives, according to them.
"In the present cut-throat competition merger will help increase area of operation too," according to chairman of Himchuli Bikas Bank Sushil Raj Parajuli.
"After the proposed merger of two financial institutions, the total paid up capital will be Rs 900 million," they said, adding that their total deposit will also be Rs 5.14 billion and lending will touch Rs 4.97 billion. "The total branch network will also be 24.
"However, they still have to get the approval from the Nepal Rastra Bank (NRB) and company registrar's office.Earlier, some of the financial institutions took wrong advantage by announcing the merger. They never get merged but unethically increased their share price by announcement of their merger forcing Nepal Stock Exchange to halt their trading.

Global FDI flow falls to half

Global foreign direct investment (FDI) inflows, cross-border mergers and acquisitions (M&As) -- the main mode of FDI -- drastically declined in the last quarter of 2008, and the fall has continued into 2009, United Nations Conference on Trade and Development (UNCTAD) data reveal.
FDI inflows dropped by 54 per cent and M&As by 77 per cent during the first quarter of 2009 as compared to the same period last year. Prospects for FDI will remain gloomy for the rest of the year, UNCTAD economists say
A renewed commitment by policy makers to an open environment for international investment will play an important role in maintaining favourable conditions for a recovery in FDI flows," UNCTAD Secretary-General Supachai Panitchpakdi said of the first quarter results. UNCTAD has been closely monitoring investment policy developments at both national and international levels.
According to UNCTAD, the data on FDI flows available for the first quarter of 2009 reveal a drastic plummet. The 54 per cent decline was apparent among the 57 countries for which quarterly data on FDI inflows were available as of mid-June 2009 (which account for roughly 60 per cent of global inflows). Forty-three countries, including major host countries such as Brazil, China, and the Russian Federation, recorded declines.FDI outflows for the same period fell by 57 per cent for 47 countries (accounting also for about 60 per cent of global FDI outflows) for which such data are available
Thus, the majority of these countries (37 out of 47), including major investors such as France, Germany, Japan, and the US, experienced declines in FDI outflows in the first quarter of 2009.
Recent data on cross-border M&As confirm this trend: they decreased by 77 per cent for all countries in value in the first quarter of 2009 as compared to the first quarter of 2008, and by 62 per cent over the last quarter of 2008. All three groups of economies -- developed countries, developing countries, and transition economies -- experienced falls in cross-border M&As. If the first quarter trend continues, projections for the whole of 2009 are for global FDI inflows to drop by close to half. While developed countries are mainly responsible for the fall of FDI in 2009 -- they have experienced a nearly 60 per cent decline -- unlike in 2008, developing countries and transition economies are also this time experiencing declines
For developing nations, the reduction is expected to be as much as 25 per cent and for transition economies as much as 40 per cent.