Vibor-Bhajuratna merger gets NRB nod

KATHMANDU, MAR 14 -

Nepal Rastra Bank (NRB) has granted letter of intent (LoI) to Vibor Bikas Bank and Bhajuratna Finance for merger. The central bank on Tuesday provided a formal letter of LoI to the officials of two financial institutions.

The two financial institutions had signed memorandum of understanding for the merger in July 2011. After getting the LoI, they have planned to accelerate the merger process to lead to conclusion.

“We are now currently conducting due diligence audits (DDA) of our financial institutions,” said Ajaya Ghimire, chief executive officer of Vibor. “After DDA report is received within a month, we have planned to complete the entire merger process within the next one and half months.”  They have planned fix value of each company’s shares after DDA reports.

The two financial institutions have planned to increase the paid up capital of merged company to Rs 1.36 billion. Vibor currently has a paid-up capital of Rs 680 million, while Bhajuratna has Rs 80million.

Main promoter of Bhajuratna—Jyoti Group and associates has promised to pump in additional capital of Rs 200 million.

The group will put money first in the form of deposit in Vibor, which will later be converted into the paid-up capital, according to Ghimire.  

“Two financial institutions have also planned raising Rs 120 million by issuing rights shares for the public,” said Ghimre.

The compilation of these amounts collected from different sources will be at Rs 1.08billion. “We will go for additional merger or bring strategic partner to increase the paid up capital to Rs 1.36billion,” said Ghimire. Vibor has said that it has already started talks with few development banks for possible merger.

After Vibor faced acute liquidity crunch about a year ago, the central bank had rescued it by providing refinancing under the lender of last resort measure.

While providing refinancing, the central bank had put a condition that it should go for merger compulsorily. Bhajuratna is also the finance company not well performing for long.

 Although there are concerns over the merger of two weak financial institutions, the central bank officials said that Vibor has largely recovered from its liquidity crunch.

Vibor sold its properties and a few good loans to repay the refinancing amount to the central bank recently. A senior NRB official said that its capital has not eroded much but its failure to manage liquidity properly in the past landed it in trouble. However, Ghimire claimed that bank’s liquidity is in comfortable position.

Source: Kantipur