Kathmandu. Securities Board of Nepal (SEBON) has granted permission to Nabil Bank to issue preferential shares.
The Securities Board of Nepal (SEBON) has granted permission to Nabil Bank to issue preferential shares worth Rs 5 billion. Nabil Bank will now issue “Nabil 8% Unissued Unissued Preferential Shares”.
NIC Asia Capital has been appointed as the issue manager for the IPO issuance. Nabil said it will issue preferential shares as it is necessary to grow the bank on a capital base through additional primary capital to enhance its business and address risks.
In the third week of June, the Securities Board of Nepal (SEBON) had made the ninth amendment to the Securities Issue and Allotment Directive, paving the way for banks and financial institutions to issue preferential shares. The Securities Board of Nepal (SEBON) has paved the way after one year of the green signal given by the Nepal Rastra Bank (NRB) to the preferential shares.
What is the provision of preferential shares?
As per the revised directive, banks and financial institutions can apply to the Securities Board of Nepal (SEBON) for the issuance of preferential shares only after taking approval from the Nepal Rastra Bank. As per the provision, banks and financial institutions can issue preferential shares at Rs 100 per share.
Similarly, banks and financial institutions will be allowed to issue preferential shares only to institutional investors with less than 50 members through a circular system. General investors, securities entrepreneurs and mutual funds are not allowed to invest in it.
Nepal Rastra Bank (NRB) has set various criteria for preferential shares.
Relief to banks under pressure of capital funds
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The opening of the way for preferential share will provide relief to the banks which have not been able to maintain the minimum limit of primary capital fund. At the same time, preference shares can be a suitable option for banks that have not been able to expand their business due to the pressure of capital funds.
Some of the banks under pressure from the capital fund have already applied to the Nepal Rastra Bank seeking permission to issue preferential shares. After the approval of the Nepal Rastra Bank, these banks will approach the Securities Board seeking permission to issue preferential shares.
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The 29th Annual General Meeting (AGM) of NMB Bank has endorsed a proposal to issue preferential shares. The bank is set to issue NMB 8.25 per cent unissued unissued reserve preference shares at a price of Rs 100 per share. After the issuance of preferential shares, the bank’s authorized capital will increase by Rs 20 billion to Rs 25 billion. After the issuance of the preferred shares, the bank’s current issued and paid-up capital will increase from Rs 18.36 billion to Rs 21.36 billion.
The 23rd Annual General Meeting (AGM) of Siddhartha Bank has approved a special proposal to issue “SBL 8.25% Unissued Unreleased Reserved Preference Shares” at a face value of Rs 100 per share after the approval of the regulatory body. The current authorized capital of the bank will be increased from Rs 16 billion to Rs 20 billion and the issued capital will be increased from Rs 14.08 billion to Rs 17.58 billion.
The 27th Annual General Meeting (AGM) of NIC Asia Bank has approved the proposal of issuing unissued unsecured preference shares worth Rs 5 billion at face value of Rs 100 per share. After the issuance of preferential shares, the bank’s authorized capital has increased from Rs 14.92 billion to Rs 19.92 billion, issued capital has increased from Rs 14.91 billion to Rs 19.91 billion and paid-up capital has increased from Rs 14.91 billion to Rs 19.91 billion.
The 21st annual general meeting of Sanima Bank has already approved the proposal for the issuance of preference shares. The bank is set to issue unissued unissued shares worth Rs 2 billion at a face value of Rs 100. The preference share has an annualized return of 8.25 percent. After the issuance of preferential shares, the authorized capital will increase from Rs 20 billion to Rs 22 billion.
Similarly, Kamana Sewa Bikas Bank has also received prior approval from Nepal Rastra Bank (NRB) to issue preferential shares. The bank is issuing unissued unissued preference shares worth Rs 350 million. The bank will issue 3.5 million units of preference shares at a face value of Rs 100. The dividend rate of this preference share is 9 percent. It will be distributed only in the year of profit.
Similarly, the 18th annual general meeting of Muktinath Bikas Bank has endorsed a special proposal seeking approval from the regulatory body for the issuance of Muktinath 8.5 percent unreleased unsecured preference shares worth Rs 2 billion at a face value of Rs 100. After the issuance of preferential shares, the bank’s current issued and paid-up capital will increase from Rs 7.04 billion to Rs 8.04 billion.
Other banks are preparing to issue preferential shares.
