A mega mystery of Mega Bank; When will crores of frozen shares be liquid again?

After Nepal Rastra Bank started using Carrot-and-Stick mechanism to reduce the number of banking and financial institutions with an aim to bring stability in the financial sector, dozens of them have undergone merger and acquisition thereby reducing their number. In this process, there are examples of big successful mergers/acquisitions that include examples of then NIC Bank with Bank of Asia, then Grand Bank with Prabhu Bank, Bank of Kathmandu with Lumbini Bank, then four institutions including 3 development Banks with Kumari Bank, four other development banks with Nepal Credit and Commercial Bank and many more. However, they say “Even the bright Moon has scars” and the mysterious case of Mega Bank is one such example. It is no mystery that Mega Bank has undergone the process of merger with Tourism Development Bank in a swap ratio of 100:95 in order to make one of the strongest capital bases the financial industry has seen so far in the country. The SGM of Mega held on Poush 4, 2074 endorsed the decision forwarded by the board (controversies kept aside). On the other hand, AGM of Tourism Bank had already cleared the way for that merger by endorsing the proposal on Mangsir 4, 2074. Even after discounting the controversy that had surrounded the entire merger process, the biggest of concerns in the financial sector was at the offing as the MOU for merger halted the trading of shares of both the institutions from Magh 9, 2073. The last trading price of Mega and tourism Bank were Rs 458 and Rs 427 respectively in Magh 2073 at a time when NEPSE was in a bearish mood with the index hovering at 1,470. Till this date of publication of this article, tentatively more than 400 days have already passed by (from Magh 9, 2073 to Falgun 25, 2074) and the days had slipped in a way there is no turning back. After the trading had halted at NEPSE, Mega Bank had capitalized its 13.25% bonus shares and 65% right shares. On the other end, Tourism Development Bank has also capitalized 19.80% bonus shares and 100% right shares. Shareholders of both the institutions have already received the allotted right and bonus shares in their respective demat accounts even after completion of the tedious process of auctioning the unsubscribed right shares. But what use has these shares offered to the public investors as the trading has remained frozen due to ongoing merger process? In these 400 plus days, the benchmark index at NEPSE had even climbed up to more than 1700 marks. The shareholders of other banks and financial institutions had pocketed handsome returns out of their stock holdings but those holding MEGA and TDBL shares in their demat accounts were reduced to become a mute spectators. Almost 1.50 lakh shareholders affected When analyzing the share structure of these financial institutions, it has been found that Mega Bank alone has over 1.44 lakh public shareholders and 1,219 promoter shareholders (highest promoter shareholding number by any commercial banks), leave alone the shareholding of Tourism Development Bank. Now the issue is what on earth is making this merger process a mega mysterious one that has already engulfed 400 plus non-returnable days of the shareholders? Let it not be forgotten as well that Mega Bank is the same institution which had kept its shareholders in a similar situation for 15 months during its merger bid earlier with Pashimanchal Development Bank forcing the millions of its shares to freeze then. Authorities with Mega Bank,however, had appeared unnaturally optimistic all these months that the joint transaction of two institutions would begin soon and the shareholders wouldn’t need to stay idol for long. However, a different side of the story has propped up recently as Sharesansar has found differing opinions from the different parties involved with the entire process. “We can’t still predict when the joint transaction would actually begin; leave alone the trading of the shares in NEPSE as our final merger documents are being reviewed by Nepal Rastra Bank.”, airs the Mega official. “The delay is definitely a matter of serious concern, however, the Central Bank also should have understood the magnitude of situation and increased its pace of work”, adds the official. Nepal Rastra Bank, however, has a different story to tell in which the related official came heavily on Mega. “The problem is not with our review and assessment system. There are other cases of big mergers as well”, the official defends the workings of Rastra Bank. “The present delay is because few issues regarding respectful adjustment of board members in the merged entity, adjustment of employees and other vital internal issues have been dragging this merger process for this long”, the official divulged after repeated follow-ups and requests. Now, lakhs of shareholders of both financial institutions are asking the single question “When can we start trading our shares? When will our supposedly liquid shares be liquid in real again?”. Unfortunately the management team alone doesn’t have all the authorities to sort out the thorny issues regarding the mergers and acquisitions which provides ample opportunities to lakhs of general shareholders to raise their fingers towards Board members of both the concerned banks, towards Nepal Rastra Bank and SEBON for not having showed enough sensitivity towards their genuine concerns.