Jalpa Samudayik Laghubitta and Kisan Laghubitta Inks Agreement For Merger on Shrawan 09

Jalpa Samudayik Laghubitta Bittiya Sanstha Limited (JALPA) and Kisan Laghubitta Bittiya Sanstha Limited (KLBSL) have taken a significant step towards integration and expansion by signing a Memorandum of Understanding (MoU) for the merger on Shrawan 09, 2023. The MoU was executed at 5:00 pm local time.

The MoU signing ceremony, held at the District Kailali office of JALPA, was attended by key representatives from both organizations. According to the provisions outlined in Section 1 of the Directive on Amalgamation/Merger and Acquisition of Securities Board of Nepal (SEBON), specific procedures have been set in motion for the seamless integration of JALPA and KLBSL. One crucial aspect mentioned in the MoU is the withholding of share transactions until the general meeting is conducted, as per the regulations laid out in Section 7 of the same directive.

The total paid-up capital of JALPA is Rs. 18.28 Crores and that of KLBSL is Rs. 50.43 Crores. 

The merger plan is now subject to approval by the regulatory authorities and relevant stakeholders. Upon obtaining the necessary approvals, the two institutions will proceed with the integration process.

The LTP of JALPA as of yesterday is Rs. 1,592.30 and that of KLBSL is Rs. 958.30. 

Surge in Kisan Laghubitta Share Price Amid Market Turmoil

After a momentous increase of the NEPSE index by 63.24 points on the day of the monetary policy announcement, the NEPSE index experienced a sharp decline of 62.85 points over the following two days. In contrast, the share price of Kisan Laghubitta Bittiya Sanstha Limited (KLBSL) has been on an upward trend for three consecutive days. As of writing, the LTP of KLBSL has reached Rs. 1037.00 after increasing by Rs. 78.70 compared to Tuesday's closing.

Within the span of three trading days, KLBSL's share price surged by 33 percent, rising from Rs. 720 to Rs. 958, with 32,411 shares traded in 544 transactions. Broker number 51 acquired 13,805 shares of KLBSL between Shrawan 4 and 9, while brokers number 50 and 35 purchased shares approximately 3,200 units. Conversely, brokers number 1 and 14 were among those who sold the most shares of Kisan Laghubitta during the same period. 

Despite the remarkable increase, some investors are skeptical about KLBSL's ability to deliver substantial dividends. The financial statement for the third quarter of 2079-80 reveals that KLBSL's income per share stands at 1 rupee 71 paise, and its reserve amounts to 15 crore 634 lakh 33 thousand rupees. The paid-up capital of KLBSL is Rs 50 crores 43 lakh 66 thousand, with a net profit of only 64 lakh 66 thousand rupees until the third quarter. In comparison, KLBSL had earned a profit of Rs. 5 crores 14 lakhs 54 thousand by the third quarter of the 2078/79 fiscal year.

The microfinance sector has faced challenges due to Nepal Rastra Bank's tightened dividends policy and the ban on multi-capital lending. Despite these setbacks, KLBSL's share price continues to surge, prompting inquiries about the reasons behind its remarkable performance.

KLBSL has applied to the SEBON for an FPO issuance of 12 lakh 98 thousand 259 shares at Rs 125 per share. However, the board has yet to grant permission for the issuance, despite KLBSL's application dating back to Ashad 29, 2078. With the bad loan ratio currently at 5.96 percent, KLBSL needs to make aggressive progress in bad loan recovery to reach dividend-paying capacity.

Notably, only 20,17,466 shares out of the total 55,453,665 shares of the company (40 percent) are ordinary shares, potentially contributing to the recent surge in share price over a short period of time. While the possibility of immediate FPO issuance remains uncertain, KLBSL's unique share supply has been factored into its price surge during this period.

Therefore, a statistical speculation can be made that some sort of insider trading of merger news due to price difference that led to the significant price hike in the securities prices of the scrips.