Why did Nepal Grameen Bikas Bank propose FPO without premium price?
Wed, Apr 5, 2017 1:06 PM on Latest, Exclusive, IPO/FPO News, Featured, Stock Market,
Nepal Grameen Bikas Bank Limited (NGBBL) has proposed Further Public Offering (FPO) of 9,75,000 units shares at a price of Rs 100 per share to be floated to the general public. It will not charge any premium to the share price and the shares will be issued at the par value of Rs 100. This has created confusion among many investors as to why NGBBL did not attach any premium to this FPO.
Why is NGBBL issuing further shares?
Nepal Grameen Bikas Bank Limited (NGBBL) is a national-level microfinance development bank formed by the merger of 5 microfinance companies in 2014: Purwanchal Grameen Bikas Bank, Madhyamanchal Grameen Bikas Bank, Paschimanchal Grameen Bikas Bank, Madhya Paschimanchal Grameen Bikas Bank and Sudur Paschimanchal Grameen Bikas Bank Limited.
Its current paid up capital stands at Rs 55.75 crore. Government of Nepal is a major promoter with 35.44% shareholding. Other major promoters include Nepal Rastra Bank and major commercial banks like Nepal Bank, Rastriya Banijya Bank, Himalayan Bank, Nepal Bangladesh Bank, Standard Chartered Bank and Bank of Kathmandu Lumbini. Currently, its promoter shareholding stands at 82.13%. The general public shareholding is only around 17.87%.
Nepal Rastra Bank requires at least 30% shares to be set aside for the general public. So, to dilute its promoter shareholding and increase its public shareholding, Nepal Grameen Bikas Bank is issuing further shares to the general public.
After the FPO of 9,75,000 units shares, its promoter shareholding will be reduced to exactly 69.908% and public shareholding will be maintained at 30.092%.
Why no premium to the share price?
To issue FPO at a premium price, the company has to meet several criteria set by SEBON:
- Out of the last 5 years in operation, the company should be in profit for the last two years and should have positive reserve fund (net worth per share should not be less than par value of share)
- Issuance of FPO should be endorsed by its AGM
- Calculation of premium price should be calculated as per given instructions