Jyoti group to join Kist Bank as biggest shareholder

KATHMANDU, MAR 13 -

A year after merging its Bhajuratna Finance with Vibor Bikas Bank, Jyoti Group is all set to enter the banking sector in a big way. The group is preparing to acquire a major stake in Kist Bank Limited from troubled realty trader Rajendra Shakya. Shakya’s Guna Group has the highest—26 percent—stake in the bank.

Shakya has been on the lookout for potential buyers for his stake in the bank to generate liquidity to complete his housing and apartments projects. Although he personally does not have any stake in the bank, his family members own huge chunk of the bank’s shares.

Jyoti Group Vice-chairman Roop Jyoti confirmed the development. “The deal has not been completed yet, but chances of the group joining the bank as a major shareholder are high,” he said, adding that Shakya requested the group to join the bank by buying his shares. “We are trying to help Shakya complete his projects,” said Jyoti.

Kist Bank Managing Director Kamal Gyawali said as far as he knew, the deal between the two parties has almost been finalised. “Jyoti Group inquired us how would we feel if they joined the bank as major investor,” said Gyawali. “I said that they are welcome as the entry of the group having a good reputation in Nepal’s business sector is good.”

Gyawali is also one of the major shareholders of the bank with an 11 percent stake. However, both the bank and the Jyoti Group are tight-lipped about the size of the deal. Lately, the promoters’ shares of the bank were traded at Rs 108 per share on the Nepal Stock Exchange.

Although the Jyoti Group had presence in the financial sector with the then Bhajuratna Finance, the sector was never on their priority list. According to group vice-chairman Jyoti, they decided to re-enter the sector in big way after Bhajuratna merged with Vibor. In an indication of changed priorities, the group had also pumped in additional amount in Vibor when the two institutions merged. The group currently has around 20 percent stake in Vibor.

According to sources, the entry of Jyoti Group in Kist is a strategic move. Possibilities of a merger between Kist and Vibor are high after the group joins Kist as a major shareholder. “This seems inevitable, as the central bank has adopted the policy of not allowing a single group to promote more than one financial institution,” the source said.

Sources at Vibor also say a merger between the banks cannot be ruled out. “In the present context, it is increasingly getting difficult for smaller financial institutions to survive. Hence, merger with Kist makes business sense,” said the source.

If Kist and Vibor merge, the paid-up capital of the merged entity would be Rs 3 billion.

Jyoti Group is likely to get the post of chairman in Kist by the virtue of being its single largest shareholder. Currently, Ram Prasad Dahal is the bank’s chairman. Dhakal had replaced Shakya as chairman after the latter was blacklisted for defaulting loans. Entry of an established business house like Jyoti Group is also beneficial for Kist. Facing a turbulent time, Kist hopes Jyoti’s entry would enhance its image because of the group’s reputation.

Kist’s financial status of as of the second quarter of this fiscal year has not been good, as it incurred a loss of Rs 69.5 million. The non-performing loans stood at 7.15 percent. However, Gyawali said the poor performance was due to high provisioning.

Source: The Kathmandu Post