Unilever factory closure: Govt asks management, workers to sit for talks

KATHMANDU, FEB 11 - 2012

Labour Relation Reform Committee (LRRC), Hetaunda, on Friday asked the management and workers of Unilever Nepal to come forward for talks without any conditions.

Unilever’s Basamadi-based factory has remained closed since Sunday as both the parties hold on to their demands.

On Wednesday, after failing to solve the dispute themselves, the agitating workers and factory management had sought the government’s help. And, the LRRC’s move came as part of the intervention of the Department of Labour.

The workers have demanded a 50 percent pay hike and other allowances, interest-free housing loan worth Rs 1 million per person and house maintenance fee of Rs 100,000 per person per year, among others.

However, the management has been rejecting the demands, terming them unreasonable. It says the workers’ salaries have already been increased by 69 percent between 2009 and 2011, even when the company’s profit rose by just 37.3 percent.

“Friday’s dialogue couldn’t bear any fruits as both the parties stuck to their stances,” said Man Bahadur BK, director general at the Department of Labour (DoL), which mobilised the Labour Office and LRRC to take care of issue.

During Friday’s talks, the management said it would sit for the dialogue only after the workers resume the factory operations, according to BK. The workers, on the other hand, said they would resume the factory only after the management’s pledges to fulfil their demands.

BK said LRRC has also asked the warring parties to appoint an intermediary on the basis of mutual understanding and trust so as to resolve the issue soon.

Source: Kantipur

Three investors eye problematic Gurkha Dev Bank

KATHMANDU, FEB 06 - 2012

Three investors, including a foreign financial institution, have shown interest in investing in Gurkha Development Bank (GDB). The bank has been declared “problematic” by the Nepal Rastra Bank (NRB).

According to a source at the bank, a Bangladeshi financial institution, a regional level development bank in Nepal and a group of Nepali investors have shown willingness to make investment in the GDB.

“The bank is holding talks with all the three parties,” said Krishna Prasad Bhattarai, the chief executive officer of the GDB. “However, this is the first phase of discussions.”

During the first round of discussions, the Bangladeshi financial institution has shown interest in investing as a foreign joint venture partner. Similarly, a national level development bank is keen to go into merger in order to get the status of a national level development bank. On the other hand, an investment group from Nepal wants to take over the management by buying at least 51 percent of the bank’s stake.

However, all the three parties have said they will invest on the condition that the central bank redeem the bank of its “problematic” status.

“Apart from being in a problematic state, it is also difficult to bring together all the promoters at one place,” Bhattarai said. “Therefore, taking a decision will take some more time.”

NRB had put forward three conditions with the management of the bank to lift the action—recovery of defaulted loans from Abdul Kawadi, selling the JSB Financial Tower and additional capital injection.

An NRB official said the bank is in the process of recovering the loans and that the regulator will lift the action if able investors show willingness to inject capital in it.

Bhattarai said the bank has already acquired land that is in the name of Abdul Kawadi and is planning to sell it through auction. The land is likely to fetch an estimated Rs 190 million.

Likewise, the bank has signed an agreement with Centriyo Global Incorporated, a Hong Kong-based Latin American company, to sell the JSB Tower for US$ 10 million. The NRB approved the agreement, and as the first instalment, the bank has already received US$ 100,000, while the rest is expected by April 7.

According to the bank, the sale of the property will solve the bank’s liquidity problem. “After the bank was declared problematic, some of our employees have resigned and we are not allowed to hire additional manpower,” Bhattarai said. “This has seriously affected our loan recovery process.”

After being declared “problematic,” the GDB has returned deposits worth about Rs 1.9 billion, while it is yet to return Rs 2.71 billion more. It has a total lending of Rs 3.7 billion.

According to an NRB source, the possibility of loans—worth Rs 600 million given under the direction of the bank’s former Chairman DB Bomjon—being recovered is very slim.

“The collateral of the lending worth Rs 600 to Rs 800 million is very poor,” said the NRB source. “The amount was lent with a wrong intention.” According to the source, most of the plots of land kept as collateral are located on river banks.

 

Source: Kantipur

Nepal Telecom profit increases by 12.48 per cent

KATHMANDU, FEB 6 2012

Nepal Telecom (NT) posted a 12.48 percent surge in its profit after tax in the last fiscal year 2010-11.

“The company has posted Rs 12.12 billion profit after income tax — up from Rs 10.77 billion in the previous fiscal year 2009-10,” managing director at the company Amar Nath Singh said during its 22th anniversary today.

The company has a target to register Rs 31 billion before-tax profit. “The overall growth rate for the first half of the current fiscal year is in line with its projection,” he added. Nepal Telecom’s management committee has also proposed 45 per cent cash dividend to its shareholders based on its profit for fiscal year 2010-11. Finance Ministry has signaled that it will approve proposal next week.

“Ministry of Information and Communication is yet to forward the file to the Finance Ministry,” said joint secretary at the ministry Baikuntha Aryal,” After we get the proposal, we will pass it immediately.”

Similarly, NT has claimed that the overall financial health of the company is satisfactory, and “it is optimistic that the government will allow the company to introduce a strategic partner within six months,” Singh said.

Nepal Telecom’s subscriber base has also swelled rapidly to 7.3 million till mid-January from 0.4 million eight years ago, he revealed.


Source: THT

Forex 3 month high against the US dollar

Rupee hits three month high against dollar

KATHMANDU, FEB 03, 2012

Nepal Rastra Bank (NRB) has fixed the exchange rate for the US dollar at Rs 78.76 for Friday marking a three-month high for the Nepali rupee. The rupee had dropped to a historic low of Rs 86.37 on Dec 16.

Nepali currency is pegged with Indian currency, and the Nepali rupee has risen along with the appreciation of the Indian rupee. The Indian rupee rose on strong inflows of the US dollar and recovery in India’s capital market that was once plagued by outflows.

Statistics from the Securities and Exchange Board of India show that overseas investors have bought Indian stocks worth US$ 2.1 billion so far this year and invested US$ 3.2 billion in debt instruments, according to Indian media.

Earlier, foreign investors had lost confidence in the Indian market as the projected annual growth rate of the Indian economy at 8 percent was revised to 7.5 percent. Various Indian media quoting different players from the private sector had also reported chances of the rate going below 7 percent.

This led foreign investors to pull back their investments from the Indian market, and the market saw high demand for the greenback raising its value sharply.

The Reserve Bank of India (RBI) also played a crucial role in bringing down the exchange rate. The RBI imposed a limit on buying and selling of the US dollar and even injected dollars indirectly into the market.

NRB spokesperson Bhasker Mani Gnawali attributed the appreciation of Indian currency to a fall in demand for the dollar in Mumbai’s money market. “Quick fluctuation in the exchange rate does not last very long,” said Gnawali.

A weaker dollar is good news for Nepali importers as prices of goods imported from third countries, including vehicles and IT related goods, will fall, stimulating their demand.

On the negative side, a strong dollar was instrumental in boosting remittance inflow, which will fall slightly at the current rate.

“However, as remittance has also grown in terms of dollars, it will not go down that notably,” said Sashin Joshi, CEO of NIC Bank.

Source: Kantipur

Sebon plans to bring guidelines for underwriters

KATHMANDU, FEB 3, 2012

Securities Board of Nepal (Sebon) is bringing the guidelines to provide functional clarity to the underwriters in case they have to purchase the shares, if the issue goes unsubscribed.

“At present there is not much details in the regulations regarding undertakings of the underwriters so the functional clarity will be brought in the new guidelines,” informed director of Sebon Niraj Giri.

The Securities Businessperson (Merchant Banker) Regulation 2064 that governs underwriters does not have provisions explaining for how long the underwriters can keep the shares purchased and what is the exit mechanism.

As the secondary market has cooled down, primary issues are also not being well-received by the public like before.

The Initial Public Offerings (IPOs) of recent times had difficult time getting subscribed unlike the earlier days, when the issues used to be oversubscribed by over 10 times.

Underwriting — that used to be only a formality for the issuers have now become an obligation to ensure the shares will be sold — are the merchant bankers that guarantee to buy unsold shares when an issue is offered for sale to the public.

If the issue goes unsubscribed, the underwriter has to buy the unsold amount of shares to ensure the public offering gets minimum rate of subscription. At present there are seven merchant bankers that have license to work as underwriters.

In August 2011, Bhargav Bikas Bank’s primary issue worth Rs 4 million did not get subscribed completely compelling its underwriter NMB Capital to purchase the shares.

“If such cases increase in the future, regulator has to prepare a concrete framework on how to divest from the share purchased due to underwriting contract,” Giri added.

Sebon is holding talks with other regulatory bodies like Nepal Rastra Bank (NRB), Insurance Board and Company Registrar’s Office so that holding and divestment of shares by merchant bankers will not create any regulatory clashes.

Since numbers of merchant bankers are the subsidiary arms of financial institutions cross holding of stakes is going to be a problem, if underwriters hang on to unsubscribed shares of other financial institutions, according to the central bank regulations.

“NRB does not allow one financial institution to hold more than one per cent of shares in another,” he said, adding that the Board needs to frame the regulation that will not violate the regulation.

“We have been asking Sebon to bring in guidelines that will direct how the unsubscribed shares have to be unloaded and how much shares should merchant bankers be allowed to trade in,” expressed president of Merchant Bankers Association of Nepal Bhishma Raj Chalise.

In the coming days, the market has to gear up for more shares with the upcoming Initial Public Offerings of some four commercial banks that will be offering bigger issues like that of commercial banks and hydropower companies needing more capacity from the side of underwriters, he added.

Source: THT

Nepal Bank plans to issue 1:9.5 right shares

KATHMANDU, FEB 3 2012

The much needed recapitalisation of the oldest commercial bank is finally underway as Nepal Bank’s proposal to issue rights shares has garnered approval from the regulator.

“We will soon be issuing right shares to the existing shareholders in 1:9.5 ratio to raise capital,” said coordinator of the management committee of Nepal Bank Maheshwor Lal Shrestha. To increase its paid up capital to Rs 4 billion, it will raise funds worth Rs 3.62 billion by issuing rights shares to the existing shareholders, including the government.

The government holds 41 per cent stake in the bank while 50 per cent is owned by public shareholders and the remainder belongs to different financial institutions.

The recapitalisation plan — forwarded to the central bank in November 2011 — was recently approved by Nepal Rastra Bank (NRB) and also by the High Level Financial Coordination Committee.

“NBL is required to increase its paid up capital to Rs 2 billion by the end of next fiscal year and if the plan is executed well on time, the bank will also be able to improve its capital adequacy framework,” Shrestha pointed out. Currently, the bank’s paid up capital stands at Rs 830 million.

However, more than half a century of bad loan and bad corporate governance has left the bank’s net worth negative by Rs 4.22 billion as of the end of last fiscal year.

Increasing paid up capital by Rs 4 billion will still fall short in making the bank’s capital adequacy ratio sufficient. The 75 year old bank that is going through almost a decade long Financial Sector Restructuring Program since 2002, has improved its performance, but the bank’s core capital is still negative.

A comprehensive audit of the bank in 1999 discovered that the bank was on the brink of insolvency due to a large number of willful defaulters. “Nepal Bank will sell the fixed but unproductive assets to raise the remaining funds,” spokesperson for NRB Bhaskar Mani Gyanwali informed, adding that the central bank is in agreement with NBL’s plan.

Earlier, the government had been suggested to inject the required deficit capital or provide loans worth the deficit amount.

Source: THT