KATHMANDU: Banks and financial institutions (BFIs) have started converting their promoter shares into ordinary shares after the Securities Board of Nepal (Sebon) declared that they could bring down the portion of promoter shares to 51 percent.Most of the BFIs presently have a share ratio of 70 percent promoter shares and 30 percent common stock.
On Wednesday, the Nepal Stock Exchange (Nepse) converted Lumbini Bank’s promoter shares into public shares reducing the portion of its promoter shares to 51 percent from 66 percent earlier.Nepse said in a notice that the conversion was made after Lumbini Bank received the go-ahead from Nepal Rastra Bank, the Company Registrar’s Office and Sebon.
On the same day, Nepse also converted the promoter shares of Bhrikuti Development Bank into public shares to make a promoter-public ratio of 51:49. According to Nepse, the shares of the development bank were converted after obtaining the approval of the relevant regulatory authorities.
Likewise, Nepse also changed share structure of Paschimanchal Finance Company maintaining the portion of promoter shares at 51 percent after the company received approval from relevant regulators.On March 10, Prime Commercial Bank reduced the stake of its promoters from 70 percent to 51 percent. A total of 4,956,198 shares have been converted into public shares.
Promoters have been eager to turn their promoter shares to public shares as they offer more benefits.Ordinary shares can be sold on the secondary market and their value is higher compared to promoter shares.
Although the central bank had allowed the conversion of promoter shares into public shares five years ago, this could not be done as Sebon’s regulation states that it requires offer document and public offering.
Sebon recently changed the regulation allowing direct conversion of promoter shares into public based on the decision of the annual general meeting of the companies concerned.New banks such as Civil Bank and Century Bank had brought down the portion of promoter shares to less than 70 percent during their establishment after the central bank allowed them to do so.