Crisis-ridden NSMF finds no buyers for its Star Mall

KATHMANDU, DEC 28 -

Crisis-ridden Nepal Share Market and Finance (NSMF) has found no buyers for its Star Mall at Putali Sadak even after extending the bidding deadline for a second time.

NSMF is desperate to sell the shopping centre to recover the money embezzled by its former chairman Yogendra Shrestha who is in jail for banking fraud. The finance company invited bids on Nov 24 after negotiations with Citizen Investment Trust for its sale failed to move ahead.

“Nobody made an offer, and we are waiting for Nepal Rastra Bank’s decision on what to do next,” said Shyam Sundar Shrestha, senior manager of NSMF. “We have not thought about re-inviting bids immediately.”

The central bank has prevented Global IME Bank and Siddhartha Bank from auctioning off the property, where it has been put up as collateral, with the expectation that it would fetch a higher price if NSMF sells it itself.

The central bank has estimated the value of Star Mall at Rs 1.3 billion. However, the finance company is ready to sell it for Rs 900 million considering the recession in the realty sector. NRB has given the finance company until mid-January to sell the property. A senior NRB official said that they were unlikely to extend the deadline.

“Although no decision regarding what to do next has been taken, it is likely that  the banks where the property has been put up as collateral will be allowed to auction it,” said the central bank official. Global IME and Siddhartha have lent around Rs 300 million to construct the mall.

The NRB official said that if NSMF had been able to sell the mall, it would have enough cash to repay its depositors.

As the finance company has not been able to recover any significant amount from the fraudster Shrestha, senior manager Shrestha said a big chunk of the embezzled amount could be recovered if Star Mall is sold.

Shrestha stole Rs 1.72 billion from the finance company by creating fake loanees, according to a due diligence audit (DDA) report. He created 96 bogus borrowers and took the money himself. NSMF has recovered Rs 150 million from Shrestha by selling his shares in Machhapuchchhre Bank.

NSMF has recovered a substantial amount of loans issued to other loanees after the fraud committed by Shrestha was revealed, even though it has not made much headway getting money back from its former chairman.

Meanwhile, as a result of the loan recovery, NSMF has reduced its liabilities to depositors considerably over the last year. When the fraud at NSMF was uncovered on May 9, 2011, the company had deposits worth Rs 3.12 billion which have now come down to Rs 1.5 billion. Likewise, its loan issue has come down to Rs 1.37 billion from Rs 5.26 billion during the period.

The finance company has also recovered Rs 375.5 million deposited in Star Savings and Credit Cooperative. The amount was recovered after selling Shrestha’s shares in Himal Hydro which had been put up as collateral in the cooperative.

Manager Shrestha said that NSMF was planning to sell Shrestha’s 24 annas of land at Kamaladi. “There is some complication as the plot is registered in the name of his wife,” said Shrestha. Despite the delays in recovering the embezzled amount, the central bank has been assuring its 13,000 depositors that they need not worry as Shrestha owns large amounts of property.

Meanwhile, NSMF has been struggling to maintain its financial health. When the finance company was declared crisis ridden on Jan 12, its capital adequacy ratio was negative by 5.73 percent which has now deteriorated to 7 percent, according to NSMF officials. According to manager Shrestha, this has happened due to some good loans turning bad since then.

Source: The Kathmandu Post