How will Everest Bank reach paid up of Rs 8 arba as other BFIs enter the merger process ?

 As many BFIs enter into merger process, Priyanka Jha analyzes how Everest Bank may reach paid up capital of Rs 8 arba.  Everest Bank Limited (EBL) announced 30% bonus share to its shareholders from the profit earned in the last fiscal year. After the adjustment of bonus its paid up capital will reach to Rs 2.76 arba from present 2.13 arba. It has a reserve of Rs 5.24 arba as of Q1 of current fiscal year. As per the capital plan submitted by Everest Bank to Nepal Rastra Bank, Everest Bank plans to raise its paid up capital by 2 arba by going to merge and acquisition with other financial institutions by the end of fiscal year 2073. Lately, there have been a lot of rumors regarding merger of Everest Bank with other banks and financial institutions. Kumari bank Ltd. and International Leasing and Finance co. Ltd (ILFC) were rumored to merge with Everest bank. Kumari Bank went into merger with NCC Bank while ILFC is merging with Civil Bank Ltd. The share price of Everest Bank has been in a rise after the rumor of its merger with Kumari Bank and ILFC was found to be false. The last traded price of Everest Bank stands at Rs 2315 as of January 28, 2016. Looking at the trend earlier, it can be said, the share price of Everest Bank will continue to rise gradually. The chances of Everest bank raising its paid up capital by 2 arba by going into merger is getting slimmer day by day. How may Everest Bank reach paid up capital of 8 arba? Nepal Rastra Bank has barred preference shares from being counted to reach the required paid up capital. Besides merger, Everest bank can use options of Acqusition, Bonus, Right and Further Public Offering (FPO)to reach paid up capital of 8 arba. FPO of Rs 45 crore and various percentage of bonus share is already in the capital plan of the bank. EBL may acquire other BFIs as part of reaching paid up capital of Rs 8 arba. The bank can use the power of its reserve to issue bonus share or increase the amount of planned FPO. If it does increase the amount of FPO then it will dilute the promoter ratio which could be least favorable option to the existing promoter share holder. Likewise, issuing right share is not viewed as favorable option for the bank. So, Everest bank will issue more bonus share or aggressively acquire BFIs in comingyears if it is unable to find the suitable merging partner.