Nepal Bank Limited's FPO receives frosty response from public

Published On: July 31, 2018 03:15 AM NPT By: Republica  | @RepublicaNepal

Only Rs 2.61 billion worth of shares out of the offered Rs 4.95 billion subscribed

KATHMANDU, July 31: Nepal Bank Ltd (NBL), the government-owned bank, is struggling to sell its shares offered through follow-on public offering (FPO). The FPO, which closed on Sunday, has drawn only 54 percent subscription.

As the stock price of the bank continues to plunge, general public have showed little interest over the offering that the bank launched to shore up its capital.

According to Siddhartha Capital Ltd -- the issue manager for FPO, the offering drew only Rs 2.61 billion from 23,780 applicants. NBL has floated a total of 17.68 million units of shares worth Rs 4.95 billion in the offering. Employees Provident Fund alone has bought shares worth Rs 1 billion. However, the final tally of the subscription is yet to be made public.

The bank had priced each share at Rs 280, including Rs 180 as premium. NBL's stock was last traded in the secondary market at Rs 291 per unit.

As the public offering is now closed, the remaining shares will be up for sale for promoters. The government owns 51 percent of the shares in NBL. As the government is reportedly not interested to inject additional capital, the remaining shares will have to be purchased by the underwriters of the FPO.

Remaining 49 percent shares are owned by the public.

Global IME Capital Ltd, NIBL ACE Capital Ltd, Civil Capital Market Ltd, Sunrise Capital Ltd Laxmi Capital Market Ltd, Sanima Capital Ltd and Nepal SBI Merchant Banking Ltd are the underwriters of the NBL's FPO. According to officials of Siddhartha Capital Ltd, these underwriters will purchase the shares in proportion to the pledge they had made to buy the unsold shares.

“First, we will publish notice to sell the shares to promoter and board directors. And then the shares that remained unsold will go to the underwriters,” said Sujan Babu Adhikari, the head of merchant banking at Siddhartha Capital Ltd.

With this offering, the paid-up capital of the NBL will soar to Rs 9.81 billion. After the shares are adjusted, the government will own 51 percent, or Rs 5 billion worth of shares in the Class 'A' bank, while the remaining 49 percent, or Rs 4.8 billion worth of shares, will be owned by the general public.

Previous FPOs also had received lukewarm response from the public. Nearly 1.16 million units of shares of Butwal Power Company worth Rs 580.07 million went unsubscribed even after the company extended the application deadline. As a result, eight underwriters had to purchase the unsold shares.The company had fixed Rs 401 premium on the share having face value of Rs 100. NMB Bank's FPO also received frosty response from the public. The commercial bank had priced its shares at Rs 401.

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