Four banks plan IPO within fiscal year

KATHMANDU, SEP 4, 2012

The season of large initial public offerings (IPO) has begun with four commercial banks -- Civil Bank, Commerz and Trust Bank, Mega Bank Nepal and Century Commercial Bank -- set to issue Rs 3.02 billion worth of shares within the current fiscal year.

Commerz and Trust Bank on Monday signed a joint agreement with Citizen Investment Trust (CIT), Nabil Investment, Civil Capital Market and Growmore Merchant Banker making them its issue and sales manager for 6 million units of ordinary shares worth Rs 600 million.

These four institutions will also act as underwriter which means they will mop up any unsold stock. Commerz and Trust Bank plans to complete the IPO by the end of the third quarter of the current fiscal year.

Meanwhile, Civil Bank has appointed Citizen Investment Trust (CIT), Nabil Investment, NCM Merchant Bank and Ace Capital as the issue and sales manager for its public offering of 8 million units of shares worth Rs 800 million.

Century Commercial Bank is making an IPO worth Rs 920 million, the largest ever public offering by a private sector commercial bank. The bank plans to issue 9.2 million ordinary shares by fiscal 2012-13. As per its share structure, the promoters will hold 54 percent while the public will hold the rest. Likewise, Mega Bank has planned an IPO worth Rs 700 million for 7 million shares.

Although the public has not been very enthusiastic about investing in the capital market recently, a bevy of banks making IPOs reflects their confidence that there will be buyers.

"It is a company’s performance that motivates investors to purchase its stocks," said Anal Bhattarai, CEO of Commerz and Trust. "Our balance sheet has portrayed a gradual and sustainable growth which will definitely lure investors."

Capital market experts, however, said that investors first look at the overall secondary market before making investment decisions. "Then only will they evaluate the performance of a company," said Rabindra Bhattarai, stock analyst. "The situation in the capital market is not very ideal at present. So all the shares on offer may not be bought."

Bankers, however, said that commercial banks had shown good performance during the last fiscal year with a majority of them registering good profits, and that it would entice investors to invest in the shares of commercial banks. "Also, the capital market is not as bad as it was a year ago, and it has been recovering constantly," said Ganesh Kumar Shrestha, CEO of Century Commercial Bank. "So, there is a high possibility that the public offerings by the commercial banks will be fully subscribed."  

Nevertheless, excess liquidity in the financial system and record low returns from the money market are likely to benefit the planned IPOs. "The interest rates offered by banks and financial institutions are declining at a rapid pace and have fallen below the inflation rate," said Bhattarai. "Generally, in such a situation, money flows to the capital market with two motives -- long-term investment and short-term speculative investment."

Last April, the IPO of Janata Bank Nepal had received an overwhelming response from the public and it was over-subscribed three-fold. The bank issued 6 million ordinary shares worth Rs 600 million. Currently, its shares are trading at around Rs 130. "For those who purchased Janata Bank shares, the value of their investment appreciated by 30 percent within four months, which is a very good return," said Bhattarai.

Source: The Kathmandu Post

Janata Bank IPO receives good response

KATHMANDU, APR 30, 2012

After a two-year hiatus, the capital market witnessed an Initial Public Offering (IPO) of a commercial bank with Janata Bank’s primary issue starting today.

“The response from the public is quite good and we expect to get all the issue subscribed within four days as estimated,” said Bhisma Raj Chalise, CEO of Civil Capital –– one of the three issue managers for Janata Bank’s IPO.

The bank has appointed Citizen Investment Trust (CIT), NMB Capital and Civil Capital as the underwriter and issue manager for the IPO worth Rs 600 million. The shares are available for the public at a face value of Rs 100 per unit share. This is the largest public issue by a private commercial bank.

The last public offering by a commercial bank was in April 2010 of Agricultural Development Bank. As the secondary market was still going strong, the issue was oversubscribed by 150 times in just three days of the opening of the IPO.

However, the continuous poor performance at the stock market has landed primary issues in a difficulty. Recent instances of IPOs of smaller development banks and finance companies hardly getting subscribed even in a month has cast a shadow on the reception of the bank’s public offering. The bank established two years back, is operating through 24 branches across Nepal.

The bank has a paid up capital worth Rs two billion and has 836 promoters. By the end of the third quarter of the current fiscal year, the bank earned Rs 43.7 million as net profit and its non-performing loans stand at 0.03 per cent.

Source: THT

IPO lines up. Seven BFIs gear up for IPOs

The domestic capital market will be witnessing another round of initial public offering (IPO)s, with seven banks and financial institutions (BFIs) gearing up for the fund raising. However, amid bearish stock market and investors’ confidence reaching lower ebb, success of the IPOs is uncertain. This is the first time in seven months that BFIs are issuing IPOs after Bhargav Bikas Bank. Bagmati Development Bank and Manjushree Financial Institution recently received approval from the Securities Board of Nepal (Sebon) for IPO issuance. Bagmati has been approved to issue ordinary shares worth Rs 40 million, while Manjushree will issue those worth Rs 23.5 million. Other five— Janata Bank Nepal, Kanchan Development Bank, Nepal Consumer Development Bank, Summit Micro Finance Development Bank and Lotus Investment Finance— are awaiting the regulator’s approval. Sebon officials said they will be granted the approval within the next month. These BFIs, excluding Lotus, will be raising Rs 731.30 million. Given the huge amount, stock market experts are doubtful whether the public will subscribe all the shares. Their scepticism is valid as even established banks failed to get all of their rights shares subscribed in the recent past. Analyst Rabindra Bhattarai said a majority of financial institutions will struggle to get all of their shares subscribed and it is most likely that a large portion of their shares will be kept by underwriters. An underwriter is a company or other entity that guarantees the purchase of a full issue of stocks. It buys shares from the issuer and sells them to investors via its distribution network. “Slowdown in secondary market affects the primary,” said Bhattarai “Investors confidence is very low at the moment.” Similar is the view of stockbroker Nanda Kishore Mundara. Public may subscribe commercial banks’ shares, but development banks and finance companies will struggle, he said. Public confidence in development banks and finance companies has dropped significantly after some of them landed in trouble a few months ago. However, Janata Bank CEO Bajay Pant is confident about the full subscription of the shares. “Commercial banks are still the first choice of investors, as it is the most transparent industry with good corporate governance,” he said. “Also, their share prices have rarely gone below the face value.” Upcoming IPOs BFIs Value Bagmati Development Bank Rs 23.50 million Manjushree Financial Institution Rs 40 million Janata Bank Nepal Rs 600 million Nepal Consumer Development Bank Rs 60 million Summit Micro Finance Development Bank Rs 7.50 million Kanchan Development Bank Rs 300,000 Lotus Investment Finance — NA Total Rs 731.30 million Source: Kantipur