SEBON approves 61.58 lakh units promoter share auction of Bank of Kathmandu; minimum bid price Rs 100 only; 28% bonus share needed to meet NRB’s capital requirement

Securities Board of Nepal (SEBON) has provided approval to Bank of Kathmandu Limited (BOKL) to sell 61,58,067 units promoter shares in auction at minimum price of Rs 100 per unit. After the auction, the bank will need to issue a further capital hike of around 28.10% to meet NRB’s minimum paid-up capital requirement, which will likely be done by issuance of bonus shares. Nabil Investment Banking Limited will be managing the auction for BOKL. After the merger of Bank of Kathmandu Limited and Lumbini Bank Limited, the promoter ownership of the merged bank was diluted to 45.64%. As per NRB’s regulation, a bank must have at least 51% promoter ownership. The bank had initially endorsed the agenda to issue Further Public Offering (FPO) for promoter shares but Securities Board of Nepal (SEBON) had rejected BOKL’s application for issuing FPO shares citing that there was no legal provision for issuing promoter shares through FPO. Earlier, the bank had published notice to auction the 61.58 lakh units promoter shares at minimum Rs 266 (Rs 166 premium to face value of Rs 100), however, the bank will now be accepting a minimum bid of Rs 100. BOKL’s current paid up capital remains at Rs 5.62 arba. After the auction, its paid up capital will reach Rs 6.24 arba. To meet NRB’s minimum paid-up capital requirement of Rs 8 arba, the bank will have to increase its capital by further Rs 1.76 arba (around 28%). Just like other BFIs, BOKL will likely issue around 28-29% bonus share to increase its capital to Rs 8 arba.