Trading of Nepal Investment Bank Resumes After 12 Months To General Public But Restricted To Basic Shareholders Of The Company

The Nepal Stock Exchange (NEPSE) has issued a circular stating that the trading of securities for the Nepal Investment Bank (NIB) has opened to the general public, except Basic shareholders of NIB.

Why was the trading of NIB halted?

Himalayan Bank (HBL) and Nepal Investment Bank Limited (NIB), two pioneer banks had signed an MoU (Memorandum of Understanding) to go into a merger. Had the merger been successful, the merged entity would have become the largest commercial bank in Nepal.

Nepal Investment Bank made a verbal and written request to NEPSE (Nepal Stock Exchange) to allow their company's shares to be traded. NEPSE, on the other hand, rejected NIB's pleas and advised the corporation to speak with NRB (Nepal Rastra Bank) about the situation. NEPSE also informed NIB that their business would only be opened if they were able to obtain a letter of acceptance from NRB.

The corporation approached NRB with the same suggestion. In addition, the company admitted guilty to the merger. In response to the company's request, the central bank agreed to halt trading of shares held by just basic shareholders while allowing trading of shares held by others to resume.

The NRB informed the NEPSE of its decision through a written letter to open public share trading while keeping basic shareholder trading closed. After the decision was handed over to the Central Bank on the Nepal Stock Exchange, the situation has returned to normal.

The last traded price of NIB was Rs. 460 on 2021-05-13. The company has resumed their trading after almost a year. 

What Was the Reason Behind the Cancellation of the Merger?

A shareholder dispute over the merger prevented the merger plan from being approved. The Due Diligence Audit (DDA) done by both banks did not satisfy about 36% of shareholders of HBL, including the Employees Provident Fund (EPF), one of the largest shareholders of HBL.

For the merger of Himalayan Bank and Nepal Investment Bank Limited, the DDA had recommended a swap ratio of 1: 1.

At present, the paid capital of NIB stands at Rs. 18.39 arba whereas HBL’s paid-up capital amounts to Rs. 12.97 arba.

Who Are Basic Share Holders and on what ground does NRB restrict their trading?

If a person purchases ordinary shares in a public company in his name personally or through a representative in ordinary shares with 0.5% or more of the paid-up capital, his basic shares in that company are regarded to be his basic share ownership.

If the approval given by the NRB in accordance with the regulations related to the merger has to be revoked, the officials of such institutions should be punished according to the rules and regulations governed by Nepal Rastra Bank. Accordingly, Restricting the basic shareholders from buying and selling shares and transferring rights may deem them disqualified from being the operators of such entities and may prevent such entities from participating in the merger or acquisition process of NRB for a certain period of time.

When the Trading of HBL will resume?

The annulment of the merger between the two banks had an impact on HBL stockholders as well. While speaking with a NEPSE spokesman, we learned that there are no immediate plans to open trading of HBL securities. HBL share holders will have to wait a little longer for an official response from NEPSE on this issue.

The last traded price as of 13th May 2021 of HBL stood at Rs 484 per share.