Prabhu Bank set to acquire ailing Grand Bank

ShareSansar, January 29:

Prabhu Bank Limited (PRVU) seems to be in no mood to put a brake on its merger and acquisition spree any time soon. After merging with Kist Bank, Gauri Shankar Development Bank and Zenith Finance on Bhadra 30 and signing an acquisition deal with Nepal Bikas Bank recently, Prabhu Bank is all set to acquire Grand Bank now.

Prabhu and Grand are expected to sign an agreement in principle in this regard by Thursday evening. Grand Bank had faced regulatory action from Nepal Rastra Bank on account of its soaring bad loans.

If the deal comes through, it would be the first institutional buy out since the introduction of acquisition policy by Nepal Rastra Bank. Prabhu and Nepal Bikas Bank had already signed an acquisition deal, for which both the banks had filed application for approval at Nepal Rastra Bank just three days ago.

Prabhu has come a long way from being a finance company to a development bank and finally a commercial bank.

Prabhu has agreed to buy Grand Bank’s total 2 crore shares at Rs 60 per share.

Prabhu has been pursuing acquisition aggressively after it succeeded to recoup the bad loans disbursed by Kist Bank following their merger. After merging with Kist, Prabhu has recovered more than 1 crore in bad loans.    

Prabhu Bank’s paid up capital, which currently stands at Rs 3.20 billion, will reach Rs 4.5 billion after buying out Grand Bank and Nepal Bikas Bank.

In the month of Bhadra this year, Grand Bank was ordered by Nepal Rastra Bank to immediately fix its surging bad loans. With no signs of improvement in the recovery of bad loans, Chief Executive Officer Parshuram Kunwar and his deputy Vijay Pant resigned from their post in the month of Kartik.

Following the resignations, situation had been getting worse. To bring things under control, the investors had decided that Grand Bank should go for merger or acquisition. There had been an attempt to merge Grand with Janata Bank earlier. The door for Prabhu to acquire Grand Bank opened after the attempt to merge Grand with Janata Bank failed.