Why the price gap between Nabil ordinary and promoter shares?

ShareSansar, October 16:

Unlike the promoter shares of other listed companies, Nabil Bank’s promoter shares are freely tradable and lucrative as its ordinary shares. But there is a significant gap between the prices of the two scrips.

The last traded price of the ordinary shares of Nabil is Rs 2,350 while the price for the promoter share stands at Rs 1,575. Why?

It is basically about investor’s perception of the promoter shares, if experts’ views are anything to go by.

A senior official with Nabil says that there is no reason as to why Nabil promoter share should be priced below the ordinary one.

“Nabil promoter share is freely tradable. Even the returns are the same,” says he. “I think the investors are gradually realizing this, and the price difference will get narrower over the recent months.”

Joint spokesperson of Nepal Stock Exchange Limited (Nepse) Murahari Parajuli, too, says that both the scrips are equally good to go for.

Citing a provision set by the central bank, Parajuli said that the first traded price of any promoter share is set at not more 50 percent of the price of the company’s ordinary share.

“The price of Nabil Promoter has definitely come a long way,” he added. “Why? There is good supply of Nabil’s promoter shares in the market and they are being frequently traded. And we all know that both shares offer same returns in terms of dividend and other rights.”

Noted market analyst Uddhav Siwakoti says that it is largely about general investor’s perception and may be due to a slight legal hassle associated with tradability of promoter share could be the reason for the price difference to continue so far.

“Not all investors are fully aware that Nabil promoter share are freely tradable,” said Siwakoti. “The only issue with this scrip is that the seller has to show that he is not blacklisted by the Credit Information Bureau.  It is very easy to get that clearance if you are not actually involved in any serious case.”

Moreover, if we look at the price gap between Nabil’s ordinary and promoter share we realize that it has been in fact getting somewhat wider over the recent years, despite the fact that the bank has equally rewarding both kinds of shareholders lavishly.  Nabil has offered 20 percent bonus share and 45 percent cash dividend for the last fiscal year, which quite impressive.

Last but not the least, what general investors should also realize is that there is no headache of promoter share conversion or oversupply of scrips whether you hold the promoter or the ordinary stock of Nabil.

As per its latest data, 50 percent of Nabil’s stake is held by NB International, 10 percent by Rastriya Beema Sansthan, just 0.57 percent by NIDC following the last round of share auction held in April, 30 percent by ordinary shareholders through the IPO, and the remaining 9.43 percent also by public in the form of promoter shares off loaded by NIDC through three rounds of share auctions. Since there is no individual promoter shareholder with Nabil and that neither NB International nor RBS is going is under any pressure or any need to off load the very profitable Nabil scrip, 60 percent of the promoter shares are virtually non-traded.

Hence, the smart investor will definitely prefer Nabil Promoter over Nabil ordinary since it as good as Nabil ordinary share, and even better if we look at the price difference.