The maze of 10% NABIL Promoter Shares finally solved! Scrip holders of NABIL Promoter Shares who will get their shares converted are likely to be in profit!

NABIL Bank Limited published a notice to inform the shareholders owning the concerned 10% NABILP shares have a choice either to remain as a promoter or to be converted into ordinary shares.

Those shareholders who are willing to be retained as promoters have to submit an application to NABIL's Share Registrar Office, Naksal within fifteen days from the date of the notice published. Therefore, investors willing to remain as promoter shareholders will have to present an application within 19th Chaitra, 2075.

If promoter shareholders fail to present the prescribed application, their shares will be converted by default to ordinary shares within from 19th Chaitra onwards by the bank itself.

This provision is in regards to only those shareholders of NABILP who have been holding the shares sold in auction by NIDC Development Bank. To know the details, let us go back to history!

Unlike the promoter shares of other listed companies, Nabil Bank’s promoter shares are freely tradable and are as lucrative as its ordinary shares. Similarly, both the ordinary and promoter shares are eligible for an equal amount of dividend and other rights.

Both the ordinary and promoter shares of the company have been trading for the last several years in the market. Investors usually hesitate to purchase promoter shares, however, promoter shares have been proved to be beneficial in case of NABIL Bank.

Going back to the root of this, we must consider the initial capital holding structure of Nabil Bank.Of the total paid-up capital, 50% is held by NB International, 10% by Rastriya Beema Company, 30% by ordinary shareholders through the IPO, and the remaining 10% percent NIDC Bank.

However, a few years back, when the Nepal Rastra Bank (NRB) issued a directive forbidding cross-holding of shares i.e. ownership of one bank by another bank, NIDC bank had to offload it’s 10% share via many rounds of share auctions to the general public.

Thus, the 10% share previously held by NIDC entered the market as Nabil promoter shares (NABILP) via multiple rounds of an auction. So, this share has similar rights as the ordinary shares and no restrictions that are generally associated with promoter shares.

Despite this fact, there was a lingering difference between NABIL price and NABILP price. The price gap was huge almost Rs 844 on 26th February, 2014, but coming to the present situation the market literacy seems to be catching. A lot this gap has decreased in the recent months.

The Annual General Meeting (AGM) notice of Nabil bank further clarifies this issue. They have mentioned in their agenda that the NABILP will now be converted into NABIL ordinary to avoid any confusion and bring uniformity in the price.

The decision for the conversion has already been approved by the bank’s Board of Directors, Nepal Rastra Bank and this agenda got approval from the bank’s AGM as well. The bank’s promoter: public shareholding ratio is 70:30 now, but after the conversion, it will be 60:40.

As of today’s LTP, the difference between NABILP and NABIL stands at Rs 37. So, investors will be profitable if they choose to convert their shares into ordinary. Nonetheless, if anyone wants to retain his/her shares as NABILP (promoter shares) that is at his/her own discretion.

Currently, under this category, there are approximately 80 lakhs units shares being traded in NEPSE with around 1200 to 1400 shareholders. If all of the shareholders convert to ordinary share then the promoter: public ratio will be 60:40 and if not, there may be slight variations.

Apart from NABILP, there are Nepal Investment Bank Limited promoter shares (NIBPO) also, which is easily tradeable in same module as NABILP in NEPSE. Rastriya Banijaya Bank Limited had sold its NIB promoter shares holding in auction module few years back to the general public.  There is also a decent price difference between both ordinary and promoter share of NIB in NEPSE.