Approx. 80 lakh units promoter shares of Nabil bank to be converted into ordinary shares; Conversion decision in the hands of shareholders

Nabil Bank’s ordinary and promoter shares have been trading in the stock market for quite a few years now and still some investors are confused as to what the difference is. Well the answer is, there is no difference. 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 equal amount of dividend and other rights. So why the confusion?

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, 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 market as Nabil promoter shares (NABILP) via multiple rounds of auction. So, this share has similar rights as the ordinary shares and no restrictions that is generally associated with promoter shares.

Despite this fact, there was a lingering difference between NABIL price and NABILP price.

As seen in the table above, the price gap was huge in 2014, but coming to 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.

According to the Secretary of Nabil Bank, Mr. Madhav Prasad Regmi, the decision for the conversion has already been approved by the bank’s Board of Directors and Nepal Rastra Bank. So, once this agenda gets approval from the bank’s AGM to be held on Falgun 27,2075 they will be issuing a formal notice.

The bank’s promoter: public shareholding ratio is 70:30 now, but after the conversion it will be 60:40. Mr. Regmi also informed that, once the notice is published, the shareholders owning the concerned NABILP shares have a choice either to remain as a promoter or to be converted into ordinary shares. Only those shareholders who will show any objection will be retained as promoters, rest everyone else will be converted by default to ordinary shareholders within few days of notice publication by the bank post their AGM.

As of today’s LTP, the difference between NABILP and NABIL stands at Rs 36. So, conversion will be profitable. Nonetheless, if anyone want 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 is 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 decent price difference between both ordinary and promoter share of NIB in NEPSE.