Committee demands Rs 15m to initiate ADBL divestment process

KATHMANDU, June 4: A sub-committee formed to initiate the process of offloading 30 percent government stake in Agriculture Development Bank Limited (ADBL) has asked the Ministry of Finance to provide US$174,000 (Rs 15.46 million) as a fee to conduct asset valuation of the state-controlled bank and hold roadshows aboard to attract foreign investors.



The sub-committee, during a recent meeting, decided to carry out asset valuation of the category ´A´ financial institution through an international firm and is planning to rope in foreign strategic partner by holding promotional campaigns in “few countries”, names of which have yet to be finalized.[break]



The current plan to divest ADBL shares is in line with the capital restructuring plan prescribed by the Asian Development Bank (ADB) - under the second phase of the Rural Finance Sector Development Cluster launched in 2004 - which, among others, had identified the need to shed the stake owned by the government.



The government currently owns 51 percent stake in ADBL - the second largest domestic bank in terms of asset. Of the remaining 49 percent share, 30 percent has been issued to the public, another 14.14 percent was distributed among its debtors in 2007, and 5.86 percent of the shares are allocated for the bank´s staff.



Once the latest divestment plan wraps up, the government will have 21 percent share in the financial institution.



Walter Silva, an international divestment consultant appointed by ADBL, has valued 30 percent bank equity at Rs 1.27 billion to Rs 1.41 billion as of April 12, with each share priced at Rs 140 to Rs 155. The figures were derived based on income approach, which focuses on projected cash flow to shareholders of the bank. The market value of each share of the bank, however, stands at Rs 134, according to Tuesday´s report of Nepal Stock Exchange.



Although these figures provide a glimpse on the bank´s present worthiness in the market, the asset valuation to be conducted by an international firm will determine the value of 30 percent stake to be shed by the government.



But even after the final value is derived, “the dynamics of an auction process should drive participants to offer their best offer,” says the report prepared by Silva.



As of now, the government is optimistic about attracting a foreign institutional investor to replenish its capital as it has been continuously generating profit and has brought down its non-performing loan to 8.44 percent of the credit portfolio as of mid-April from 47 percent in 2003.



“The bank is not in the red as in the past and has a wide network, not only in urban centers but in rural areas as well,” an official of the Ministry of Finance said.

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