After breaking the agreement with Dev, Garima Development Bank bought Sahara and stopped trading in the secondary market
By Rabindra Dhungel, 4 October 2020. Share trading in Garima Development Bank’s secondary market has been suspended. The Nepal Stock Exchange (NSE) said on Sunday that trading has been suspended for the time being as the process for acquisition of Sahara Development Bank has been expedited.
Sahara has not traded in the stock market for more than three years. The Sahara Development Bank, along with the Securities and Exchange Board of Nepal (SEB) and the regulatory body, could not explain to the general investors the reason for not trading for such a long time. Shareholder investment has been mortgaged for three years.
Dev: Nepse had suspended the trading of Sahara’s shares in the secondary market from June 10, 2074 BS after receiving information from the Development Bank.
An official of the Securities and Exchange Board (SEB) said that the board had sent a letter of intent to the bank a few months ago to explain the reason for non-trading of shares. After the letter, the bank had informed the board that it had not opened the share transaction as it was in talks with Garima Development Bank.
Dev Bikas Bank had signed an agreement on June 10, 2074 BS to acquire Sahara. Dev: Sahara’s share trading has been suspended even a year and a half after the acquisition agreement with the bank was broken.
According to Sahara Chairman Sugandakumar Gupta, the trading was not open as the Nepal Rastra Bank (NRB) had instructed not to open trading in securities shares unless it increased its paid-up capital and entered into a merger and acquisition agreement with another bank.
As of mid-July last year, Sahara’s paid-up capital is 163.336 million. The NRB had directed the bank to increase its paid-up capital to Rs 1.20 billion. After that, the bank had issued 1,824,870 shares in the ratio of 1 to 2.5 from June 20, 2075 BS.
The bank had sold the rights on the basis of 729.94 million paid-up capital. However, due to non-sale of all the shares, it was not possible to maintain the 255.48 million after the vesting. The bank has sold its unsold shares at auction after two years and now has a paid-up capital of Rs 255.4 million.
The bank has decided to go for realization as it has not been able to maintain the required capital. According to NRB Executive Director Dev Kumar Dhakal, the shares could not be opened due to the bank’s action. “Once a bank or a financial company enters into a merger or acquisition agreement, it will have to face the action prescribed by the NRB,” he said.
He says that if the agreement is canceled after the share transaction which has been suspended after the merger or acquisition agreement, the trading of the securities will not be resumed until the merger and acquisition agreement is signed with any other bank.
NRB has directed the development banks to increase the minimum paid up capital to Rs. 500 million. However, as Sahara Development Bank is a state level bank, NRB had directed to increase the paid up capital to Rs 1.20 billion. According to NRB, Sahara should have increased the capital by December 2076.
The share trading could not be opened due to non-payment of the paid-up capital. Gupta, chairman of Sahara Development Bank, says, “The NRB’s policy of making it difficult even by issuing licenses for trading has not been able to open share trading. The directive given by the National Bank to increase the capital of a bank with a capital of Rs 70 million to Rs 1.20 billion at a time is heavy.
According to Nepse, Garima Development Bank has signed a memorandum of understanding (MoU) to acquire Sahara Development Bank.
A memorandum of understanding (MoU) was signed last Friday to acquire Sahara, a national-level Garima Development Bank headquartered in Malangwa, Sarlahi.
At present, the paid up capital of Garima Development Bank is Rs 3.23 billion, while the paid up capital of Sahara is Rs 255.48 million.
Garima has 102 branch offices in the same province, while Sahara has 4 branch offices and one extension counter in Sarlahi district of Province 2.