Khetan Group keen to buy govt stake

KATHMANDU, MAR 04 -

With Nepal Bank Limited (NBL) working on the recapitalisation plan, the Khetan Group has expressed interest to purchase government’s shares in the bank.

The group, which currently holds 9.5 percent stake in NBL, has said it would be ready to buy out the government’s stake (around 41 percent) if the latter wishes to sell. “If the government sells it stake in NBL, we (Khetan Group) along with other like-minded investors are ready to acquire it,” said Rajendra Khetan, chairman of the group.

The NBL management is currently holding discussions with the bank’s major shareholders on the recapitalisation process following the central bank nod.

The country’s oldest bank, NBL on Friday held discussions with its major shareholders on the plan. The NBL management is gearing up to issue 1:9.5 rights shares to raise its paid-up capital to Rs 4 billion from the existing Rs 380 million. If rights shares are issued, each shareholder will have to put money 9.5 times of his/her current stake to meet the set target. As per the bank’s capital increment plan, the Khetan Group needs to inject Rs 350 million as per the current capital structure.

However, in order to purchase the government’s stake, the group needs to invest Rs 1.5 billion more. “We need to invest Rs 1.85 billion in total if we are to purchase the government-owned shares too,” said Khetan. “Our plan is to raise our stake in the bank to 51 percent.”

Along with the government, groups like Khetan and Golchha, Pashupati Sumser Rana, Niranjan Kumar Tibdewala, Gajendra Bahadur Shrestha, Niraj Rajbhandari, Ramesh Raj Aryal, Nabin Narshing Rana, Indira Khatri, Kedar Narayan Manandhar and Bal Krishna Shrestha have sizeable shares in NBL.

According to the Khetan Group, which is also a promoter of Laxmi Bank, they are willing to take up NBL’s strategic management by increasing their stake to 51 percent in their quest to have a strong financial institution in the country. “Within a few years from now, a strong bank having a paid-up capital of Rs 10 to 15 billion is needed,” said Khetan. “Our effort is to merge all financial institutions un-der our ownership and have one solid bank.”

Finance Ministry Joint Secretary Baikuntha Aryal, who was present at the meeting, however, said the government has agreed in principle to invest Rs 1.5 billion in the bank.

Other shareholders proposed conditions like conducting Due Diligence Report (DDR) and formation of the board of director including investors before making additional investment. “We cannot inject additional capital in the current situation,” said another shareholder. Khetan also said there must be a guarantee of at least eight percent return as well as the stock should be listed on the stock exchange for capital increment.

Over the last 10 years, the bank went through the much-talked about reform programme, under which a foreign management team led its operations for some time. The programme that began in 2002 saw NBL getting into automation, working aggressively in loan recovery and reducing non-performing loan (NPL) level. Ever since the foreign management—ICC Group of Scotland—left NBL, it is being run by NRB. Although the privatisation of the bank was the ultimate goal of the reform programme, the government, of late, has not pushed that agenda aggressively. Therefore, the government eventually selling its stake in NBL looks unlikely unless it changes its mind.

Following the financial sector reform programme, the bank’s non-performing loan (NPL) level has come down to 5.17 percent from 60 percent. However, the

bank is still facing a negative net worth—Rs 4.22 billion. However, for the healthy operation of the bank, a capital of about Rs 9.74 billion is required, according to the bank management.

Source: Kantipur