Central bank to offload its stake in Nepse

The central bank is offloading its stake in the Nepal Stock Exchange (Nepse) Limited.
The central bank is divesting its stake in the stock exchange company through auction, according to a notice – publishing today by Nepal Rastra Bank (NRB) – that reads the NRB is selling 1.73 million units of Nepse shares at a minimum bidding price of Rs 1,032 per unit, after adding premium in the Rs 100 face value.
The central bank has sought a sealed application from the interested bank, financial institute, share trader and the listed organisation by August 19. The sealed documents should be submitted to the central bank’s fiscal management department before the deadline, the notice reads, adding that the central bank is selling 1,729,989 units of its stake of Nepse.
The Nepse has some 58.66 per cent government investment, 34.60 per cent central bank, 6.12 per cent NIDC Capital and remaining 0.62 per cent belongs to share brokers.
The trading process will be conducted as according to Nepal Rastra Bank Act.
Along with the central bank, the government also wants to divest its shares from the Nepse. But the government is taking time to offload its shares. The government will offload its share to bring in strategic partner in the stock exchange, according to Financial Sector Development Strategy.
A study team led by S R Panday – some five years ago to provide suggestions on the restructuring of Nepse – also advised the government to privatise Nepse by offloading its share to bring efficiency into the share market.

CIB nabs NIDC Capital Market former executive, staff

The Central Investigation Bureau (CIB) has arrested former management officials and borrower of NIDC Capital Market for embezzlement of deposit.

The CIB arrested former chief executive Khum Bahadur Hira Singh Rana, loan manager Meena Shrestha, loan access consultant Pramod Bahadur Thapa and the borrower Ratna Kumar Gautam.

They have been arrested from various places on different dates, the CIB said, adding that they have misued their rights and floated loan on low quality collateral.

Capital gains tax plunges by over three times

Adjusted price of shares — due to a flooding of bonus and rights shares — and decreasing share price have brought down the capital gain tax (CGT) collection, which is expected to drop by over three times.
The Nepal Stock Exchange (Nepse) estimated to collect Rs 270 million capital gain tax in the financial year 2009-10, a whopping fall compared to the last financial year. "By May 29, the Nepse has collected Rs 248.9 million capital gain tax," said Nepse chairman Tanka Paneru while presenting the report during the 28th annual general meeting (AGM) of the Nepse in the capital yesterday. "By the end of this financial year, we expect to collect Rs 270 million," he added.
It is over three times below the collection registered in the previous financial year. The Nepse had collected Rs 910 million CGT during the fiscal 2008-09. In the fiscal 2007-08, it had collected Rs 910 million
A capital gain tax is a tax charged on capital gains, the profit realised on the sale of a share that was purchased at a lower price. The capital gain tax is charged 10 per cent for individuals and 15 per cent for institutions.
"After the Nepse has been changed to a profit-oriented organisation, it has posted Rs 136.4 million income in fiscal 2007-08," Paneru said. Similarly, the Nepse has registered an income of Rs 158.5 million in fiscal 2008-09, which is 16.20 per cent up, compared to fiscal 2007-08. It has registered a net profit of Rs 85.4 million in the fiscal year 2008-07, an increase of 20.45 per cent compared to fiscal 2007-08.
In fiscal 2007-08, it had posted a net profit of Rs 70.9 million. The AGM has also approved a 20 per cent cash dividend from the profit of 2007-08.
"But the secondary market has not announced any dividend as it is planning to increase its capital," Paneru informed. The AGM has approved the increase in capital. According to the approved capital structure, the paid-up capital of Nepse will be Rs 300 million.
"The increase in paid-up capital will help Nepse to privatise in future," Shanker Man Singh, Nepse's general manager said
The government, Nepal Rastra Bank (NRB), Nepal Industrial Development Corporation (NIDC)and brokers are the promoters of Nepse, the only organised secondary market in the country, where 171 companies have been listed for trading in their shares. "The paid-up capital of the listed companies’ stands at Rs 75,342 million by the end of May 29, 2010," according to Nepse. However, the market capitalisation has decreased to Rs 3.79 trillion from Rs 5.13 trillion in fiscal 2008-09.

Sebon approves Chilime primary issue

Securities Board of Nepal (Sebon) has approved the much-awaited Chilime Hydropower Company's primary issue of 23,04,000 units. The board permitted Chilime to add 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 equal to its networth.
Today its per unit share was traded at Rs 1,125 per unit at the Nepal Stock Exchange Ltd (Nepse) -- the sole secondary market.
According to the new regulation, a company can issue primary shares adding premium if it has recorded profit and distributed bonus for three consecutive years. Chilime last week distributed 35 per cent cash dividends to its shareholders from last year's profits. The model hydropower company, after repeated pressure from Sebon, finally agreed to float its primary shares to the public, though it had sold shares to Nepal Electricity Authority (NEA) staff and started trading in the secondary market according to the then regulation.
Chilime Hydropower -- constructed with domestic technology -- has been long planning to raise Rs 240 million through an equity offering. The Chilime model 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.
Chilime Hydropower is the first hydropower company to be listed for share trading at Nepse. The much-vaunted Chilime model will be replicated in the Upper Tamakoshi Hydropower soon. Currently, there are only three listed hydropower companies -- National Hydropower, Butwal Hydropower and Chilime Hydropower -- in the secondary market.
The issue and sales manager of Chilime's primary issue are NIDC Capital Market Ltd and Citizen Investment Trust.
Sebon -- the regulator of the capital market approved the primary issue on the basis of the Due Diligence Certificate the company provided the board.

ADBL readies for largest public issue

Agriculture Development Bank Ltd (ADBL) has appointed Ace Development Bank Ltd as the issue manager for its mega initial public offering (IPO) of 96,00,000-unit shares worth Rs 960 million.
Janak Raj Shah, chief executive officer (CEO) of ADBL, and Siddhanta Raj Pandey CEO and MD of Ace Development Bank Ltd signed an agreement on behalf of their respective organisations here today. The agreement paves the way for ADBL to issue the largest ever public offering. By next month, the bank will float the primary issue.
Three issue managers -- Ace Development Bank, NMB Bank and NIDC Capital Market -- had applied to ADBL to get the post of issue manager. But Ace got selected.

"Established as a development bank, ADBL is now a commercial bank," Shah said adding that the new financial institutions (FIs) cannot match its network strength. The growing number of FIs are a concern for some economists. But Shah thinks the growing number of FIs is beneficial for the economy as they will push up the rate of interest. He was of the view that policy rethink is the need of an hour as the concentration of financial insititutions is increasing in urban areas leaving the rural areas far behind.
"More FIs are needed to monetise the whole economy," he justified adding that rural sectors are still out of reach of the banks. "The increasing number of FIs and increasing deposit indicate that the market is not saturated yet," said Shah.
The growing number of financial institutions has also led to cut-throat competition and growing consumerism which has been blamed for sub-prime loan leading to the global financial crisis.
"Banks also must face business cycle and Nepali banks will have to face it sooner or later," said Shah, who is also the president of Managament Association of Nepal (MAN). He added that competition would bring good results. "FIs will be selective in investment, maintain professional ethics and culture and risk mitigation practices.
"However, as a commercial bank ADBL has also started consumer banking. Shah thinks that ADBL's case is different. "The other FIs have limitations and are forced to concentrate on consumer segment," he said, "That could lead to problems."His prescription to the central bank, Nepal Rastra Bank (NRB), is to do assessment with right policy measures and be more vigilant in mitigating risk. "The lack of a long term policy and inconsistency in policy matters have hit us and we are only into patch-up work," Shah said.
Talking about financial reform programme and privatisation, the wholly government-owned commercial bank's chief was of the opinion that Indian and Chinese experiences could be imitated. "They have not completly divested their banks but entered into partnetships," he added.Banks can be wheels of change too. "Development and commercial banks should be linked up," ADBL's first CEO Shah said. He pointed out, "Capital is key in development activities, but in Nepal the concentration of capital is in urban areas only -- that could create imbalance."