Kist, Vibor call off merger

Due to differences over how to move ahead in the post merger scenario Kist Bank and Vibor Bikas Bank today decided to call it a quit after eight months of signing Memorandum of Understanding (MoU).

The confusion started after the exit in June of the then managing director of Kist Bank Kamal Gnawali – over the embezzlement  – who was supposed to be the chief executive of the merged entity.

"The merger process was sailing smoothly aiming at concluding it within the last fiscal year till June," a source at the merger committee that has three representatives from Kist and two from Vibor.

A meeting of the merger committee today decided to table the decision not to move ahead with merger process at their respective financial institutions to officially close the merger chapter between them.

Kist and Jyoti Group's Vibor had signed the MoU on March 21. But they have not yet completed due diligence audit (DDA) that would help fix the share swap ratio. They have also failed to reduce their non-performing loans (NPLs) below five per cent within three months as they have agreed during the agreement.

The delay has made the shareholders of both the financial institutions impatient as they have not been able to sell their shares. Nepal Stock Exchange (Nepse) has suspended the trading of the shares of both the financial institutions after they started merger process.

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Jyoti Group's Vibor Bikas Bank, Kist Bank to merge

Jyoti Group — a reputed business house of the country — is ready to take control of a commercial bank soon.

The group — that had merged its class 'C' financial institution Bhajuratna Finance with class 'B' Vibor Bikas Bank last year — today signed a memorandum of understanding for the merger process of Vibor Bikas Bank with Kist Bank.

"A merger committee including representatives of both the financial institutions will be formed soon," said chairman of Vibor Bikas Bank Dr Roop Jyoti. "The committee will appoint a reputed chartered accountant for the due diligence audit that will define the share swap ratio between the two institutions," he said, adding that the merged commercial bank will be a strong financial institution.

Kist Bank has a network of 51 branches, whereas Vibor has six. Likewise, Kist has a paid up capital of Rs 2 billion, while Vibor has a paid up capital of Rs 916.2 million.

The annual general meeting of Kist Bank had approved the merger of the bank, said managing director of Kist Bank Kamal Gnawali, promising that the merged entity will come into operations within the current fiscal year as both the financial institutions have many similarities in their operations.

Currently, Kist Bank's NPA stands at 7.15 per cent due to real estate lendings. "But the bank has reduced its real estate loans considerably," Gnawali claimed.

Likewise, Vibor Bikas Bank has also divested its property business and has improved its financial condition, informed its director Ajay Ghimire.

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.

Nepse plunges, investors nervous

Nepse this week plunged by 22.94 points to close at 578.19 points from Sunday morning's opening of 601.13 points.
Psycological pressure of book closures, fresh supply of stocks, financial institutions margin call -- due to continuous decrease in price of shares -- made investors more nervous forcing them to exit from the market.
In comparision to the new listing, the number of investors did not increase giving some smart investors a chance to sell off their shares at the current price and buy at a much lower price afterwards as according to them, the secondary market index is expected to drop further.
This week itself, primary shares of Sunrise Bank (12.5-million-units), Prime Comercial Bank (10-million-units), Vibor Bikas Bank (6.8-million-units) and rights shares of Civil Merchant Bittiya Sanstha (4,99,270-units), People's Finance (666962-units), Pokhara Finance (12,720-units), Narayani Development Bank (99884-units) and Nirdhan Utthan Bank (20,9936-units) were listed at Nepal Stock Exchange, making the total number of listed shares over 928.72-million-units, including promoters' shares, corporate debentures, bonds, preferred shares and mutual funds.
Of the total 26 commercial banks, Nepse has 23 commercial banks (with over 281.56-million-unit shares) under its banks sub-group that is the key player in the domestic market. Of the remaining three commercial banks, Nepal Bank Ltd has been delisted, Agricuture Development Bank is floating its shares worth Rs 960 million soon and Rastriya Banijya Bank is a complete government undertaking.
Thirty 30 development banks are listed at Nepse in the development banks sub-group with a total of over 66.34-million-unit shares. Sixty-two finance companies are listed at Nepse with 81,932,204-unit shares.
Though there are 18 companies in the manufacturing sub-group, the sub-group is the least traded and the weakest player in the domestic secondary market unlike the global secondary market practice.
Market pandits think that the institutional investor is the need of the hour as the existing investors are unable to hold the fresh supply of shares. Apart from the nervousness of current investors, the continuous bearish trend has repelled new investors from the secondary market as the major market player -- commercial banks sub-group -- this week also lost a whopping 34.69 points to close at 552.19 points from Sunday morning's opening of 586.88 points.
Bank of Kathmandu topped the chart in terms of transaction this week with Rs 31.19 million followed by Kist Bank with Rs 27.59 million, Nepal SBI Bank with Rs 26.20 million, Standard Chartered Bank Nepal with Rs 20.57 million and Nabil Bank with Rs 14.70 million.
In terms of number of share units traded this week, Kist Bank dominated the secondary market with its 76,000-unit of shares changing hands. Pashupati Development Bank topped the chart in terms of transaction number with 566 tradings in its kitty.
During the five-day session, 95 companies saw their shares being traded. The contribution of Group-A companies increased to 64.48 per cent against last week's 56.48 per cent while the 78-scrip sensitive index -- a barometer of Group-A companies -- also lost 7.20 points to drop to 144.57 from Sunday morning's opening of 151.77 points.
The float index -- calculated on the basis of real transactions -- also dropped by 1.22 points to slide to 56.26 points from its opening of 57.48 points.

Vibor Bikas Bank's primary issue oversubscribed by over four times

The primary issue of Vibor Bikas Bank is oversubscribed fourfold to over Rs 1.10 billion. The development bank floated 26,52,000-unit primary shares at a face value of Rs 100 per on June 10.
According to NMB Bank -- sales and issue manager of Vibor Bikas Bank -- the primary issue closed today after the banking hours as the IPO was oversubscribed.
According to the new IPO regulation, the IPO can be closed in four days if it is oversubscribed. Otherwise, it has to be open for a month.
"On the first three days, 32,684 applications worth Rs 558.2 million were received," said Niraj Giri, director at the Securities Board of Nepal (Sebon) -- the regulatory authority of the capital market.
On the last day today, it expects to receive 20,000 applications worth around Rs 500 million, making it a total of over Rs 1 billion -- around four times than what the bank has asked for.
The bank's promoters collectively hold 61 per cent of the total capital of Rs 680 million. However, no individual promoter holds more than three per cent share. The average shareholding is 0.45 per cent and standard deviation 0.46 per cent. The remaining 39 per cent of the shares have been floated among the general public.
Vibor Bikas Bank -- a national level Class B financial institution licensed by Nepal Rastra Bank -- commenced operations from October 4, 2007. It is promoted by 135 professionals with diverse backgrounds.
Meanwhile, Chilime Hydropower that was supposed to float 23,04,000-unit shares from June 15 has been told by the Supreme Court to halt it. Chilime had added a premium of Rs 223.70 to the face value of Rs 100 per unit, making it a total of Rs 323.70 per unit share.
Arun Valley Hydropower is also floating 5,15,000-unit primary shares from June 23. The company has added a premium of Rs 84 to the face value of Rs 100, making it Rs 184 per unit share.
According to the new regulation, a company can add premium equal to its networth, if it is in profit and has distributed cash dividend for three consecutive years. Both Chilime and Arun Valley have distributed cash dividend from their profits for the last three years. Chilime distributed 35 per cent and Arun Valley distributed 20 per cent cash dividend from the profits of last fiscal year.

IPOs and applications
Institutions -- Amount of floated shares -- Applied amount -- Multiplicity -- Applicants
Prime Commercial Bank -- Rs 300 million -- Rs 8950 million -- 29.85 times -- 3,22,973
Sunrise Bank -- Rs 375 million -- Rs 10,000 million -- 26.75 times -- 3,22,703
Citizens Bank International -- Rs 300 million -- Rs 6120 million -- 20.55 times -- 2,75,042
Bank of Asia -- Rs 300 million -- Rs 5670 million -- 18.90 times -- 2,67,834
Apee Finance -- Rs 18 million -- 485.8 million -- 26.98 times -- 38,009
Madhyamanchal Gramin Bank -- Rs 30 million -- Rs 230 million -- 7.8 times -- 20,214
Total -- Rs 1.32 billion -- Rs 31.54 billion -- 23 times -- 12,46,775 applicants
(Source: Securities Board of Nepal)

Arun Valley Hydro to float primary shares

The market for initial public offerings (IPO) is hot despite the fall in Nepse. At least three firms -- two hydropower companies and one financial institution -- are poised to float primary issues.
Arun Valley Hydropower Company will float 5,15,000-unit primary shares from June 23. The hydropower company has added a premium of Rs 84 to the face value of Rs 100, making it Rs 184 per unit share. This is the second company to float primary issue adding premium.
Earlier, the much-awaited Chilime Hydropower added a premium of Rs 223.70 to the face value of Rs 100 per unit, making it a total of Rs 323.70 per unit share. Chilime Hydropower will float 23,04,000-unit shares from June 15.
According to the new Securities Board of Nepal (Sebon) regulation, a company can add premium equal to its networth, if it is in profit and has distributed cash dividend for three consecutive years. Both Chilime and Arun Valley have distributed cash dividend from their profits for the last three years. Chilime distributed 35 per cent and Arun Valley distributed 20 per cent cash dividend from the profits of last fiscal year.
Arun Valley Hydropower -- that constructed Piluwakhola Hydropower in Chainpur of Shankhuwasabha district -- has been providing 20 per cent cash dividend from the profit of its successive three fiscal years.
Interested applicants can apply for a minimum of 50-unit of shares of Arun valley while a minimum 20-unit can be applied for of Chilime Hydropower. Similarly, the maximum number of units one can apply for of Arun Valley is 50,000-unit while for Chilime its 1,000-unit only. NMB Bank is the sales and issue manager for Arun Valley's primary issue whereas the issue and sales managers of Chilime's primary issue are NIDC Capital Market and Citizen Investment Trust (CIT).
The company -- established in 1997 and promoted by Guru Prasad Neupane, Jeevan Raj Shakya and Amar Raj Tamrakar -- with the objective to develop, build, own and operate hydropower projects, formed joint ventures with companies to build medium and large hydropower projects and to develop entrepreneurship for the promotion of the hydropower sector's currently-owned Piluwakhola Hydropower Project (3MW).
The promoters own 12,00,000-unit shares and the remaining 17,15,000-unit will be floated for the public. "Some of the upcoming projects of Arun Valley are Upper Piluwa Khola Small Hydropower Project (4.5MW), Lower Phemekhola Small Hydropower Project (2.2MW) and Kabeli-B1 Small Hydropower Project (9.8MW)," said Ramesh Prashad Neupane, project manager of the company. "The new investment partner will be Janata Bank that is being promoted by Guru Prasad Neupane and is in the process of getting the licence of a commercial bank," he added.
Currently, there are only three listed hydropower companies -- National Hydropower, Butwal Hydropower and Chilime Hydropower -- in the secondary market. After Arun Valley's listing, there will be four hydropower companies in the secondary market.
An indigenous hydropwer company, Chilime Hydropower is an example of how Nepalis can themselves construct hydro power plants by raising money from the domestic market if the government has a clear vision of utilising the capital market for development purpose.
Meanwhile, Vibor Bikas Bank has floated 26,52,000-unit primary shares from todat that wil close on Sunday.