KATHMANDU, Nov 8 - 2012
Nepal Rastra Bank has extended final approval for the merger of three category ´C´ financial institutions Butwal Finance, CMB Finance and Alpic Everest Finance.
The consolidated unit, which will be known as Synergy Finance Company - a category ´C´ financial institution with a paid-up capital of Rs 474.4 million - will come into operation within a month.
As per the agreement between shareholders, promoters of Butwal Finance will control around 49 percent stake in the new unit; investors of CMB will own around 26 percent shares and promoters of Alpic will control around 25 percent stake in the merged company.
Based on this arrangement, shareholders holding every 100 units of shares in Butwal Finance will be entitled to 120 units of shares in the consolidated unit. Similarly, every shareholder controlling 100 shares of Alpic will get 110 units of shares in the new unit, while shareholders holding 100 units of shares of CMB will receive 88 units of shares in the merged unit.
To evaluate the performance of the management, the consolidated unit has agreed to form a nine-member board of director, five of whom will come from promoters group, three from public shareholders and one from among professionals.
The management team of the merged finance company, on the other hand, will be headed by Rajendra Man Shakya, the existing CEO of CMB Finance.
"My main goal will be to strike a balance between borrowers´ demand for cheaper loans and depositors´ demand for higher deposit rates," said Shakya, who is also the president of Nepal Finance Companies Association. "In this regard, we will be offering competitive borrowing and lending rates to lure as many clients."
One of the biggest challenges faced by finance companies these days is retaining depositors as many have started moving base after losing confidence in them due to cases of financial imprudence and bad governance.
As a result, deposits of finance companies stood at Rs 76.85 billion as of mid-September as against Rs 81.55 billion recorded in July 2011. This kind of situation, at a time when the banking system has a liquidity surplus of at least Rs 32 billion, shows many finance companies are currently struggling to maintain liquidity.
Although latest audited balance sheets of three finance companies that are merging are not available, financial reports available so far show the consolidated unit will be financially sound as its non-performing loans will stand at less than five percent of the total credit portfolio.
Since the new unit will also have a capital adequacy ratio of around 20 percent, it will give leeway to the company to expand its credit portfolio rampantly which is essential to generate profit.
Source: Republica
Nepal Rastra Bank has extended final approval for the merger of three category ´C´ financial institutions Butwal Finance, CMB Finance and Alpic Everest Finance.
The consolidated unit, which will be known as Synergy Finance Company - a category ´C´ financial institution with a paid-up capital of Rs 474.4 million - will come into operation within a month.
As per the agreement between shareholders, promoters of Butwal Finance will control around 49 percent stake in the new unit; investors of CMB will own around 26 percent shares and promoters of Alpic will control around 25 percent stake in the merged company.
Based on this arrangement, shareholders holding every 100 units of shares in Butwal Finance will be entitled to 120 units of shares in the consolidated unit. Similarly, every shareholder controlling 100 shares of Alpic will get 110 units of shares in the new unit, while shareholders holding 100 units of shares of CMB will receive 88 units of shares in the merged unit.
To evaluate the performance of the management, the consolidated unit has agreed to form a nine-member board of director, five of whom will come from promoters group, three from public shareholders and one from among professionals.
The management team of the merged finance company, on the other hand, will be headed by Rajendra Man Shakya, the existing CEO of CMB Finance.
"My main goal will be to strike a balance between borrowers´ demand for cheaper loans and depositors´ demand for higher deposit rates," said Shakya, who is also the president of Nepal Finance Companies Association. "In this regard, we will be offering competitive borrowing and lending rates to lure as many clients."
One of the biggest challenges faced by finance companies these days is retaining depositors as many have started moving base after losing confidence in them due to cases of financial imprudence and bad governance.
As a result, deposits of finance companies stood at Rs 76.85 billion as of mid-September as against Rs 81.55 billion recorded in July 2011. This kind of situation, at a time when the banking system has a liquidity surplus of at least Rs 32 billion, shows many finance companies are currently struggling to maintain liquidity.
Although latest audited balance sheets of three finance companies that are merging are not available, financial reports available so far show the consolidated unit will be financially sound as its non-performing loans will stand at less than five percent of the total credit portfolio.
Since the new unit will also have a capital adequacy ratio of around 20 percent, it will give leeway to the company to expand its credit portfolio rampantly which is essential to generate profit.
Source: Republica
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