RBB unable to sell its shares in NIBL

Rastriya Banijya Bank (RBB) has not been able to sell its promoters' shares of Nepal Investment Bank as per Nepal Rastra Bank's (NRB) direction as the Security Board of Nepal (SEBON) was not satisfied with the minimum price quoted by the bank.

The RBB has quoted Rs. 1068 per share which SEBON rejected saying that it was unjustifiable. "Although SEBON asked RBB to review the quoted price twice, the bank refused to review the price without any justification," said a SEBON official. SEBON chairman Surbir Poudel said that his office would not permit RBB to sell the promoters share at the quoted price at any cost until its justification was presented to SEBON. "It seems that the RBB management wants to continue holding the NIB shares as they are," he charged. "And it wants to point the finger at SEBON for failing to sell its shares."

RBB had applied to SEBON to permit the bank to sell its 2.30 million units of promoter shares remaining in Nepal Investment Bank Limited (NIBL) at a premium price (higher than the book value of Rs. 100 per share). As per the existing rules, a company making a profit for three consecutive years can sell its promoter shares at a premium price. However, RBB chief executive officer Janardan Acharya said that the quoted price was justifiable on the grounds that it was fixed after thorough consultation with experts. "If we reduce the price by just one rupee, we will have to lose Rs. 2.3 million," he said. "We are ready to reduce the price if our first attempt fails to lure buyers," he said.

RBB treasury department Chief Keshav Lamsal said that the SEBON failed to justify its rejection although the RBB had presented the clear basis of quoted price when it first approached to SEBON. According to him, the quoted price was an average price produced after calculating various factors including the book value ratio, sales multiple method, demand growth model, earning before depreciation and tax and average per share price of NIB shares for 180 days and 90 days twice among others. "SEBON should have told us which standard they were unsatisfied with," Lamsal said.

RBB had first approached SEBON on April 13, 2009 with a sales proposal. SEBON wrote to RBB asking it to improve its sales proposal along with the quoted price on May 19. On June 8, RBB replied saying that the board decided to quote the above price on the basis of calculating 180 days of NIBL share price, according to SEBON. It also claimed the same on June 18. On June 25, SEBON wrote to RBB to adjust its quoted price but RBB in its reply on July 20 didn't mention anything about the price by just making some improvement in the sales proposal, according to SEBON. Then, SEBON is mum over the issue.

Given the failure of RBB to sell those shares, it has to make cent percent provision in NRB as per the NRB direction. NRB had told financial institutions to sell their cross holdings by July 9 at any cost. The RBB has already asked the central bank to extend the period of selling its cross holding by October 17.

RBB has 3.70 million units of promoters' share of NIBL. "It wants to sell the remaining shares after converting them into public shares," said Acharya. He said that it delayed to sell the remaining shares as the conversion of promoter shares into public one should be endorsed by the annual general meeting of NIBL.
Source: Kantipur