What is stopping PCBL scrip from rising in the bullish market?

ShareSansar, June 3:

Prime Commercial Bank Limited’s scrip has not been able to grow despite the bullish trend in the market for so many months.

It was priced at around Rs 480 when the NEPSE index hovered around 780 level, the scrip is still priced at around the same rate though the benchmark index has surged by more than a hundred point.

This despite the fact that the commercial bank is faring satisfactory all through the current fiscal year, and is  considered one of the good banks among the newer ones.

Following this scrip regularly for the past several months suggest that it has not been able to grow largely due to some rumors and misleading information that have been affecting the bank.

One of the biggest setbacks to the scrip comes in the form of a rumor that has been doing rounds in the market for quite some time. The rumor is that Prime is seeking merger with Narayani National Finance Limited.

But officials from both Prime and Narayani have ruled out the rumor of the merger with Narayani as baseless and done with vested interest to surge the scrip of the finance company with huge non-performing loan.

“We don’t know who is spreading this rumor,” Chief Executive Officer Narayani Finance Naresh Singh Bohara told ShareSansar today. “We have not even formally approached Prime Bank for any merger deal.”

He said that since he has many friends and even relatives among the promoters of Prime Bank, he sometimes goes to meet them, and that’s all.

A senior official with Prime complained that this baseless rumor about the merger at 40 percent swap ratio for Narayani has been affecting their scrip especially as Narayani does not have an impressive financial health.

Though Narayani’s non-performing loan has now dropped to 1.71 as per the unaudited report for the third quarter, it stood at 2.49 percent at the end of the second quarter, and 4.49 percent at the end of the previous third quarter.

On the other hand, the rumor has been fuelling Narayani’s scrip, which currently hovers around Rs 220.  
 
Apparently some vested interest with high stakes in Narayani are fanning the rumor. And they are very tactful in that rumor seems credible since both these BFIs have some common promoter groups.

But we should remember that Prime has some 330 persons holding its promoter holding, and that a few common promoter shareholders in two BFIs do not offer solid ground for their merger.

Another factor that is stopping Prime’s scrip from rising is the news of promoter share conversion.

Though Prime, with 70 percent promoter holding and only 30 percent public shares, has to covert 19 percent of its promoter shares to ordinary ones through its Annual General Meeting, it will take around six months before the bank holds its upcoming AGM, which may decide on share conversion.

Once the AGM decides to the share conversion, it has to be approved by regulators such as the central bank and Securities Board of Nepal (SEBON), which again will take another six months or so.

Hence, these are the reasons which are stemming the growth of Prime’s scrip though are no genuine and compelling reasons that should hurt the price of Prime’s scrip  -- well, except false rumors and insufficient information about the scrip that are doing rounds.