Market Watch, Stock News

ADBN IPO within mid-August

Published by Octron on August 1, 2009

We broke the news on June itself, ADBL will be releasing an IPO worth Rs. 960 Million, now its tentative date has been fixed. According to Republica,
Agricultural Development Bank (ADB) Nepal is planning to float its shares in the market by mid-August, Janak Raj Shah, CEO of the bank, said.

“We are currently waiting for approval from Securities Board of Nepal,” Shah told journalists at a press meet organized in Kathmandu on Friday. “Soon after we get the clearance, we will launch the Initial Public Offering (IPO). This can happen within mid-August.”

ADB-Nepal is launching the biggest IPO of Rs 960 million in Nepal.

Established in 1968, ADB Nepal, a state-owned bank, was incorporated into a public limited company in July 2005.

In the last fiscal year ended July 15, this category ´A´ bank generated a net profit of Rs 1.67 billion. This profit, however, does not include the entire fund that the bank received from the government for writing off debts of borrowers, Shah said.

In the last fiscal year, the government had waived debts of individuals who had borrowed loans of up to Rs 30,000 from ADB Nepal. It had also waived interest and other penalties for persons who had taken a loan ranging between Rs 30,000 and Rs 100,000 from the bank.

To compensate the bank for writing off debts and interest amounts, the government in the last fiscal year had given Rs 4.17 billion to the bank. Of this amount, the bank has deposited Rs 3.89 billion in its reserve fund. This amount, however, has not been included while calculating net profit of the bank, Shah clarified.

Till the last fiscal year, ADB Nepal collected Rs 35.04 billion in deposits and mobilized Rs 38.22 billion in loans. By the end of the last fiscal year, its non-performing loans had also come down to 8.66 percent from 11.69 percent of fiscal year 2007/08.

Experts Advice:
As written before, we would not recommend people for this IPO. Here are some reasons, if you haven’t got hint from above article;

Huge NPL, when banks & even finance companies are margining NPL to below 1%, this bank still holds 8.66% NPL. Huge distraction for investors
51% still owned by government. Didn’t we learn from NTC.
Stability & Policy of Government: Sworojgar Scheme (2 Lakh Money Distribution Scheme without collateral and no bond to pay back), Waiving all loans below 30,000 (even principal), waiving all penalty and interest on small to medium loans
ADB has been Government’s vehicle to mobilize cash from its reserve funds, so its books can be easily cooked.
Just before the IPO, they are constantly playing Advertisement of ADB in major stations, TV channels & cinema halls, claiming they are the biggest bank in Nepal with excellent manpower & service. Doesn’t it smell FISHY !
ADB clearly knows, people wont be attracted to this IPO, so they are releasing the IPO after people get money back from all IPOs (Sunrise, Vibor, Prime, Crystal, Arun, PDB)

On the fun note; The way, this bank is waiving loan principal, interest on one hand and releasing huge block of IPO on the other hand bring backs one the famous dailouge from the bollywood movie – Hera Pheri (Starring Paresh Rawal, Akshay, Sunil);

“ek haath se lenge, doosare se denge, toh bachega kya….????
Tambura !”

I think, nobody wants TAMBURA !

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