Know how easy is tradability of promoter share of NIBL squared off by RBB
Mon, Sep 1, 2014 12:00 AM
ShareSansar, September 1:
While the Rastriya Banijya Bank Ltd (RBB) has started the process of divesting the cross-holding at Nepal Investment Bank Ltd (NIBL) through the auction, there are confusions related to the easy tradability of the crossholding promoter shares. ShareSansar tried to find out the process and the possibility of the easy tradability and how the price will be set for the trading in the secondary market.
EASY TRADIBILITY?
Since promoter shares are not easily tradable like ordinary shares, general investors’ attraction towards promoter share is relatively low.
There are certain processes and complications during the trading of the promoter shares like, the approval from the central regulatory bank, proclamation by the investor that s (he) is not blacklisted, low price than the ordinary share’s price. Because, of these reasons, investors shrug off from buying the promoter shares of any bank.
Regarding the tradability of the NIBL promoter cross holding shares that the RBB is selling, the officials say it is likely to be traded in the secondary market akin to the crossholding shares of the NIDC at Nabil Bank which is being traded as ‘NABILP’ in the Nepal Stock Exchange (Nepse).
“We have asked the Nepse about its tradability process and they have said that it will be traded like the NABILP. However, we have not got any written assurance of that,” RBB treasury department chief Bhupendra Pandey said.
If the investor owning the shares above the 2 percent of total shares, or say above 800,000 units of shares, s (h) should get the approval of the central regulatory bank and other ‘fit and proper testing’ process.
According to Pandey, if the unit of shares is below such limit, the investors can easily sell the shares just by proclaiming that s (he) is not blacklisted.
“The trading of the promoter shares will be conducted as per the directives of the NRB regarding the promoter shares crossholding,” Pandey said.
According to the directives of the NRB, unlike the provision of giving priority to other promoter while selling and transferring the ownership of the promoter shares is not applicable to the cross holding promoter shares while trading at the stock market.
The base price of the per unit share of the NIBL cross-holding promoter share at the stock market would be determined by the market principle, Nimbal Shrestha, another official Nimbal Shrestha at Treasury Department of RBB told ShhareSansar.
An official of the Nepse, however, told ShareSansar that the base price should be set above the 50 percent price of the ordinary share’s price.
“This means if the NIBL per unit closing share price is Rs 890, the price range of the crossholding promoter share should be at least Rs 445 to enter into the stock market for the trading,” the official added.
PLANS TO CONDUCT ALLOTMENT BEFORE BOOK CLOSURE
Similarly, NIBL is yet to announce the dividend and the book closure which means that the new buyers of these shares are likely to reap the dividend benefits of the bank.
“Targets are that we will conduct the allotment before the NIBL announces the book closure which will allow the new buyers to get the dividend. However, it is related with the NIBL also, we cannot say when the NIBL will announce the book closure,” Praveen Raman Parajuli, CEO of Nabil Investment Banking Ltd- the issue manager of the RIBL told ShareSansar.
NIBL has earned Rs 1.95 arba of net profit in the last fiscal year 2070/71 while it had distributed 35 percent dividend-25 percent cash and 10 percent bonus shares- last year from the profit earned in the previous year.
RBB's Pandey also said that they have planned in a way that the new buyers will get the dividend of this fiscal year. “We will do the allotment whatever bidding we get within Bhadra 30 so that the investors will get the dividend of the NIBL,” he added.
“While you compare with other bank which has a similar balance sheet size, the price of the NIBL scrip is underpriced. This bank is giving a good return thus the scrip is valuable,” claimed Pandey.
