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The divestment of the government’s holdings in Bank of Bhutan, or increasing the bank’s share capital through a primary float, must take place by June 1, failing which a severe penalty will be imposed, the central bank announced yesterday.
“The timing is not negotiable,” the central bank’s deputy governor, Eden Dema, said.
The bank was levied a penalty of Nu 5,000 a day from November 8 last year to 8 April 2011, for failing to comply with the central bank’s deadline to issue the prospectus for divestment. “The penalty was imposed almost three and a half years, since the directive to divest was given,” Eden Dema said. The penalty accrued is Nu 750,000 which the bank wants waived, but the central bank has denied.
The central bank directed BoB to go public, based on the regulations for the establishment of commercial banks in March 2007.
But officials of Druk Holdings and Investments (DHI), which holds 80 percent of the bank, said it might not be possible to revalue the bank’s assets to determine its share price before June 1.
Although RMA also provided options on how to determine share prices, based on the banks audited account of December 2010, DHI’s executive director, Damber Singh Kharka, said the recent balance sheet of the bank does not reflect the current value of its assets like land and its investments on shares.
“Valuation of a company assets, which has been in the market for 43 years, may require a great deal of time,” he said. “The bank doesn’t have the capacity to come out with a proper valuation within June 1.” DHI had also considered requesting international consultants to assist with determining the share prices.
On the criticism it received on preempting the parliament with regards to divestment, Eden Dema said, if RMA had to wait for the Financial Services Bill to be passed in the parliament, it would also have to stop the operation of new banks, because it comes under the purview of the FSA.
On April 11 last year, the bank decided to go public on its own accord and offload 33 percent of its holdings and had sought RMA’s approval. However, the next month, DHI sent a letter to the central bank to reconsider the public float.
RMA has suggested that the bank could either make an offer for subscription or an offer for sale.
Offer for subscription would mean enlarging the share capital. The bank’s paid up capital could increase to Nu 533M, if Nu 133M worth of shares was floated to the public.
The offer for sale would require the shareholders DHI and State Bank of India to offload 25 percent of the holdings.
Eden Dema said the offer for subscription is better, since it benefits the company in the long run.
The central bank arrived at a share price of Nu 577 a share, according to figures available with RMA. The banks paid up capital at Nu 400M, its reserves at Nu 1.9B, retained earnings at Nu 883 and the total number of shares at 4M.
According to the procedures and timeframe for the divestment set by RMA, it will require the bank to prepare its prospectus by May 6, submit it before May 20 and publish the abridged prospectus by May 27.
Source: Kuenselonline
“The timing is not negotiable,” the central bank’s deputy governor, Eden Dema, said.
The bank was levied a penalty of Nu 5,000 a day from November 8 last year to 8 April 2011, for failing to comply with the central bank’s deadline to issue the prospectus for divestment. “The penalty was imposed almost three and a half years, since the directive to divest was given,” Eden Dema said. The penalty accrued is Nu 750,000 which the bank wants waived, but the central bank has denied.
The central bank directed BoB to go public, based on the regulations for the establishment of commercial banks in March 2007.
But officials of Druk Holdings and Investments (DHI), which holds 80 percent of the bank, said it might not be possible to revalue the bank’s assets to determine its share price before June 1.
Although RMA also provided options on how to determine share prices, based on the banks audited account of December 2010, DHI’s executive director, Damber Singh Kharka, said the recent balance sheet of the bank does not reflect the current value of its assets like land and its investments on shares.
“Valuation of a company assets, which has been in the market for 43 years, may require a great deal of time,” he said. “The bank doesn’t have the capacity to come out with a proper valuation within June 1.” DHI had also considered requesting international consultants to assist with determining the share prices.
On the criticism it received on preempting the parliament with regards to divestment, Eden Dema said, if RMA had to wait for the Financial Services Bill to be passed in the parliament, it would also have to stop the operation of new banks, because it comes under the purview of the FSA.
On April 11 last year, the bank decided to go public on its own accord and offload 33 percent of its holdings and had sought RMA’s approval. However, the next month, DHI sent a letter to the central bank to reconsider the public float.
RMA has suggested that the bank could either make an offer for subscription or an offer for sale.
Offer for subscription would mean enlarging the share capital. The bank’s paid up capital could increase to Nu 533M, if Nu 133M worth of shares was floated to the public.
The offer for sale would require the shareholders DHI and State Bank of India to offload 25 percent of the holdings.
Eden Dema said the offer for subscription is better, since it benefits the company in the long run.
The central bank arrived at a share price of Nu 577 a share, according to figures available with RMA. The banks paid up capital at Nu 400M, its reserves at Nu 1.9B, retained earnings at Nu 883 and the total number of shares at 4M.
According to the procedures and timeframe for the divestment set by RMA, it will require the bank to prepare its prospectus by May 6, submit it before May 20 and publish the abridged prospectus by May 27.
Source: Kuenselonline
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