KATHMANDU, DEC 13 - 2013
The merger bandwagon is rolling at full speed in the banking sector with Lumbini Bank and Manjushree Finance being the latest to announce a tie-up. The two companies signed a memorandum of understanding (MoU) to merge on Wednesday.
The Nepal Stock Exchange (Nepse) has halted trading of their shares. Lumbini and Manjushree’s latest share prices stood at Rs 280 and Rs 128 apiece respectively.
As per the rules, they are required to complete the merger within the next six months. However, Lumbini CEO Shovan Dev Pant said they would adopt a rush schedule and do it in three months. The name Lumbini Bank will be retained and CEO Pant will keep his post.
The merger trend began after the central bank fixed a mid-July 2014 deadline for banks to increase the paid-up capital to Rs 2 billion. Those who would not be able to put together the extra capital have opted to combine.
After the merger of Lumbini and Manjushree, the paid-up capital of the new company will be Rs 1.82 billion. Lumbini currently has a paid-up capital of Rs 1.6 billion while Manjushree’s paid-up capital amounts to Rs 225 million. Lumbini plans to increase the capital to the level specified by Nepal Rastra Bank (NRB) by issuing bonus shares from the profits of the last and current fiscal years.
In the last fiscal year, Lumbini earned a net profit of Rs 140 million. Its net profit in the last quarter amounted to Rs 24.81 million. Manjushree has not published the financial details of the last quarter. It made a profit of Rs 27.31 million in the fourth quarter of the last fiscal.
Lumbini’s total deposits and loan issue amounted to Rs 12 billion and Rs 10.39 billion respectively in the last quarter. Manjushree held deposits worth Rs 1 billion as at the end of the last fiscal. Is credit issue amounted to Rs 954 million. Pant said that the planned merger was part of their growth strategy following Lumbini’s recovery from a difficult past. “This will fulfil the capital requirement as prescribed by the central bank,” he added. Lumbini Bank had run into a rough patch due to the bad governance of its promoters. It has now achieved a turnaround and is seeking to grow.
Lumbini has few branches due to restrictions imposed by the central bank when it was going through its bad phase. After the merger, there will be 18 branches. The combined number of employees will be over 75. Pant said that they plan not to lay off any employee from either side as far as possible. “We will now carry out a due diligence audit (DDA) of both the bank and the finance company,” said Pant. “The swap ratio of shares will be determined based on the DDA.”
According to NRB, two commercial banks merged, two development banks combined to become a commercial bank, and 10 development banks and 12 finance companies merged to form seven development banks in fiscal 2012-13.
Posted on: 2013-12-13 08:55
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