Banijya Bank to sell cross-holdings to highest bidder

KATHMANDU, JAN 04 -

Rastriya Banijya Bank (RBB) has decided to sell to the highest bidder its 5.84 million promoter shares of Nepal Investment Bank Limited (NIBL) and Nepal Housing Finance Company.

The state-owned bank called for bids for its stock after Nepal Rastra Bank cracked down against it for maintaining cross-holding. The central bank has stopped RBB from obtaining dividends and bonus shares from NIBL for violating its directive.

RBB has cross-holding of 5,652,016 shares at NIBL (15 percent of its stock) and another cross-holding of 196,027 shares at Nepal Housing Company. The deadline for submitting bids has been set for mid-January.

Minimum prices for NIBL and Nepal Housing shares have been fixed at Rs  594 and Rs 101 apiece respectively.

As the value of promoter shares is usually lower than public

shares, the minimum value fixed by RBB is also lower compared to the public shares of both the financial institutions.

“We have not received any offers so far, but we expect bidders will turn up during the closing moments,” said RBB CEO Krishna Prasad Sharma. He admitted that the central bank’s decision had injected a sense of urgency, but they had been working on getting rid of the cross-holding for the last two months.

RBB has missed cash dividends  Rs 140 million from NIBL due to the central bank’s prohibition.

NIBL’s recent annual general meeting had okayed distributing 10 percent bonus shares and 25 percent cash dividend to its shareholders.

The central bank has said that it can stop banks and financial institutions not ending cross-holding from getting dividends and bonus shares and buying right shares. The bonus shares on hold will be released only after all the cross-holdings have been sold.  

Meanwhile, RBB has mentioned in the notice inviting bids that individual firms and a number of firms can bid jointly for all its shares in one of the two financial institutions. Bidders are required to deposit 10 percent of the quoted amount in RBB first.

Five years ago, RBB had tried to sell off its shares in NIBL, but a dispute with the Securities Board of Nepal (Sebon) over the minimum price resulted in the plan being shelved.

RBB had set the minimum price at Rs 1,068 apiece but Sebon said it was too high for promoter shares. At that time, the value of NIBL’s public shares was around Rs 1,900. RBB gave up the idea after the share market plunged.

Source: The Kathmandu Post