Currently, the ADBL has 51 percent stake of the government. Once the divestment is completed, it will limit government´s share holding in the bank at 21 percent. [break]
As for the remaining 49 percent stake, 30 percent was issued to the public last year; another 14.14 percent was distributed among its debtors in 2007, and 5.86 percent of the shares have been allocated for the bank´s staffers which are yet to be distributed.
To effectively execute the divestment plan, the bank is soon appointing a consultant, who would be responsible to find institutional investors willing to own a stake in the bank. It has already issued a public notice in this regard, asking interested candidates to submit their application.
“The entire process of hiring the consultant would conclude within the end of this month or early next month,” Shiva Adhikari, chief marketing officer of the ADBL, told Republica.
The main responsibility of the consultant would be to gather proposals from potential national and international strategic partners. “These proposals would then be reviewed by the bank before settling down on one institutional investor,” Adhikari said, without elaborating the selection process of preferred investor.
The bank is divesting 30 percent more shares under the second phase of the Rural Finance Sector Development Cluster launched by the Asian Development Bank (ADB) in 2004.
The Manila-based international institutional lender had extended support to the ADBL after the state-controlled bank nearly went bankrupt in 2003 with non performing loans touching 47 percent of the total lending. Since then the ADB has injected Rs 8.7 billion into the bank as preference shares and has extended technical support by upgrading its IT infrastructure and providing IT related training to the staff.
In return, ADB had asked ADBL to give a complete overhaul to its governance practices, management structure, business processes and the way it was delivering services. It had also asked for divestment of shares owned by the government under which 30 percent was issued to the public and 30 percent will be divested in the near future.
Since that time, the bank´s financial health has also improved. It generated a net profit of Rs 1.6 billion last fiscal year. Over the years, the bank has also converted Rs 2.30 billion of the ADB loans into debentures.
Although its non-performing loan stood at 8.64 percent till the end of last fiscal year - compared with commercial banks´ average of 2.3 percent - this was down from 10.97 percent of the previous year.
These improvements have restored people´s confidence in the bank which was reflected last year when its initial public offering was oversubscribed by 150 percent.
“The bank hopes to receive similar reaction from institutional investors, when it floats 30 percent more shares in the market,” Adhikari added.
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