R&D Economic Research & Business Development
Agriculture Development Bank Limited (ADBL) has sought permission from the Securities Board of Nepal (SEBON) for the issuance of initial public offering (IPO) worth Rs. 960 million. ADBL will sell its 9.6 million units of shares valued at Rs. 100 per share to the general public as per the plan. It will be the largest ever IPO in the country any company has offered so far. "As soon as SEBON approves the proposal, we will start floating the IPO," said Manohar Shrestha, a manager of the bank. "We hope we will be able to issue shares within three months." The company should issue shares within two months of approval from the SEBON as per the SEBON's regulation on share issuance. According to the bank, 480,000 units of share out of 9.6 million will be sold to its employees. It is the second time the bank is floating ordinary shares. The bank had floated ordinary shares worth Rs. 125 million about a year and a half ago. Farmers who had taken loans from the bank were given the bank's shares then. Ace Development Bank will be the issue manager in ADBL's IPO if SEBON approves its application. With the latest issuance of shares, the ownership of the government in the bank remains at 51 percent, according to Shrestha. The Bank has ordinary paid up capital of Rs. 1.62 billion. After the bank was converted into a public limited company in 2005, the process of issuing shares for public had begun. A public limited company should issue 30 percent share to the public as per the Bank and Financial Institution Act. SEBON spokesperson Niraj Giri said that the regulator would see the documents whether the measures of disclosures were taken and provide approval after necessary conditions were met. "Given that this is the largest ever floating of shares, it will also be an acid test of whether the public will respond to the bank against its relatively weak financial position," he said. As per the Nepal's Rastra Bank's third quarterly report, the bank's reserves and surpluses are still negative by Rs. 4.5 billion. However, the bank's non-performing loans are decreasing and the status of its capital fund is also positive. Its NPL stands at 10.8 percent of its total loans. NPL of less than five percent is considered a good performance. ADBL is one of the three banks in which the government has a majority stake. Nepal Bank Limited and Rastriya Banijaya Bank still have negative net worth which disqualifies it from issues IPOs. Source: www.kantipuronline.com Date: 20/06/2009
7