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IFIC Bank backtracked on its two-year plan to sell its stake in Nabil Bank of Nepal as policy changes in the South Asian country diminished the possibility of gaining the expected profit from the deal.
Instead, it considers keeping its 7.77 per cent share in Nabil Bank, Nepal's number one private commercial bank, more profitable.
Had the deal been finalised as anticipated, IFIC Bank would have received Nepalese rupee of 6.187 billion, equivalent to Tk 5.09 billion.
"We have terminated the plan of selling the share for a change in policy," said Md. Mokammel Hoque, company secretary of IFIC Bank.
Projected gains no longer possible
A few years back when the Nepal Ministry of Finance decided to bring down the number of banks in the economy, it offered tax benefits encouraging mergers.
The ministry declared that within two years of any merger any party would enjoy tax exemptions on capital gains from selling its shares.
That prompted IFIC Bank to consider selling its stake in Nepal Bangladesh Bank as the organisation was looking to merge with Nabil Bank.
Nepal Bangladesh Bank, which began operations in June 1994, was a joint venture commercial bank between Bangladesh's IFIC Bank and a group of Nepali entrepreneurs. IFIC Bank had a 40.90 per cent stake in it ahead of the merger with Nabil Bank.
IFIC Bank decided to sell its entire share in Nepal Bangladesh Bank to Ms. Sarika Chaudhary, wife of Nepal's wealthiest person Binod Chaudhury, the first businessman from the Himalayan nation to be on the Forbes billionaire list. Binod is the chairman of Chaudhury Group, a founder of Nabil Bank.
Later, Nepal Bangladesh Bank was amalgamated into Nabil Bank on June 10, 2022 at a share exchange ratio of 100:43, meaning the former does not exist anymore.
But after the merger, the central bank of Nepal said it would not allow the selling of shares before June 9, 2024, thereby removing the scope of tax benefits.
Since Nabil Bank is a good performing listed bank in Nepal, IFIC Bank now holds onto the hope for good dividend income from its stake.
"We will only sell the shares if the deal is profitable," said the IFIC company secretary.
IFIC Bank presently holds 7.77 per cent shares in Nabil Bank, having a director representing it in the board. Nabil Bank has a network of 246 branches across Nepal.