KATHMANDU, Oct 12: The country´s capital market witnessed the first over-the-counter (OTC) trading of stocks at Nepal Stock Exchange (Nepse) on Thursday.
Under the contract, Nepal Bank Limited sold 71,928 units of its shares worth Rs 100 each to its own employees. A total of 2,664 staff members of the bank bought the stocks that were offloaded by the government.
With the sales, the government´s stake in the state-backed bank, which has a negative net worth of Rs 2.68 billion, now hovers at 38 percent from 40.49 percent as of Wednesday.
Nepal Bank resorted to over-the-counter trading to sell its stocks, as its shares are not listed on the stock exchange. The shares of the bank were delisted from the stock market in March 2004 based on request from the bank, Nepal Rastra Bank and the government, following the institution´s enrolment in the financial sector reform program launched by the World Bank.
With the successful completion of the over-the-counter trading, Nepal Bank is now all set to list itself on Nepse, which is essential for the category ´A´ financial institution to raise fresh capital through issuance of rights shares.
“If things go according to plan, we will be sending application on rights purchase to our existing shareholders within a few days,” Maheshwor Lal Shrestha, coordinator of the bank, said. “Listing of bank´s shares and rights issuance will take place after the Dashain festival is over.”
The bank is issuing rights shares in the ratio of 1:9.5 to its existing shareholders, except the government, at the price of Rs 100 each. This means holder of every share will have to purchase 9.5 additional shares. This will inject an additional Rs 2.23 billion in capital into the bank.
In July, the government had also pumped in Rs 1.39 billion into the bank by purchasing the portion of rights shares allocated to it.
Existing shareholders had viewed the government´s decision to inject fresh capital into the bank positively, which, they said, has motivated them to make their part of contribution.
Despite this optimism, some of the shareholders may not be able to purchase rights shares floated by the bank, as the central bank bars promoters of one financial institution from holding more than one percent of stake in other banking institutions.
“In this sceneario, those shareholders, who do not qualify for purchasing rights shares, should appoint other buyers. If not, rights shares allocated to them will be auctioned,” a high-ranking official of the bank told Republica.
Established in November 1937, Nepal Bank, once a successful banking institution, saw its non-performing loan (NPL) soar to 59 percent of the total credit portfolio by 2002 due to issuance of loans without adequate security.
Since then it has undergone a reform program, which has bolstered its financial condition. In the last fiscal year ended July 15, the bank´s NPL fell to 5.23 percent and generated a net profit of Rs 406.73 million.