Shareholders lose due to long halt in trading
KATHMANDU, FEB 9:
Shareholders of financial institutions seeking to upgrade are in a state of limbo as the upgrading procedures which are cumbersome are preventing them from carrying out business at the stock exchange.
The halt in trading, of three financial institutions opting to upgrade, at Nepse since early 2010 is yet to resume. The central bank gave a green signal to Sanima Bikas Bank and Annapurna Finance Company (AFC), in October 2011 to upgrade to a commercial bank and national level development bank, respectively.
However, International Leasing and Finance Company (ILFC)’s trading has not yet resumed at Nepse even though the chances of ILFC becoming a commercial bank are non existent.
“Stock trading of Sanima and AFC will resume once the upgrading process is completed,” spokesperson for Nepal Rastra Bank (NRB) Bhaskar Mani Gyanwali, said, adding, “As for ILFC, it depends on the finance company itself to restart trading.”
ILFC had applied to upgrade to a commercial bank from a class ‘C’ finance company about two years back by increasing its paid up capital to Rs 2 billion. However, since then the central bank has become stricter in terms of allowing upgradation and also prohibited class ‘C’ financial institutions to directly upgrade to a class ‘A’ financial institution, from March 2011.
“ILFC is also seeking to merge with other financial institutions that might have prevented it from resuming trading,” he added. With the process of mergers rising, stock trading of 18 financial institutions has been suspended. Machchhapuchhre Bank is the only commercial bank seeking a merger with Standard Finance.
Earlier, when NMB Bank, DCBL Bank and Kist Bank were still finance companies and seeking to upgrade to commercial banks, share prices of these companies were manipulated, pushing prices as high as Rs 5,000 per unit. NRB had stepped in then and asked the concerned financial institutions to halt their share trading.
In addition, trading of four financial institutions — Nepal Share Market, Capital Merchant Banking and Finance, Madhyamanchal Bikas Bank and Gurkha Development Bank — has been halted due to their recent financial troubles. Shareholders of de-listed Nepal Bank are still at a loss on how to get back their investments made on the bank’s shares.
“It is those shareholders, seeking to obtain loans by pledging shares, who are in a difficulty due to the halt in trading as no financial institution is willing to lend against the shares that are not being traded,” pointed out general secretary at Nepal Stock Investors’ Association Prakash Rajoria.
“Yet, most shareholders have not been very affected by the halt in trading of listed companies as the market itself is down and transaction volumes have also contracted, and billions of rupees are stuck in these companies,” he added.
The capital market regulator is also hoping to hold talks with central bank regarding the fate of some of the companies. “We cannot breach one regulator’s rule and direct resumption in trading without any consultation,” said director of Securities Board of Nepal Niraj Giri.
Source: THT
