BoC unlikely to fully take up their NDB rights
View(s):The Bank of Ceylon (BoC) is unlikely to take up their rights entitlement fully in NDB as they are cash strapped to buy them, industry experts said.
“Some quantity of BoC’s rights has been offered to other investors at the bank’s direction,” a stockbroker told the Business Times. BOC’s capital adequacy ratios are low, especially with the impending increases in these ratios according to Basel III by next year.
According to Basel III, if a bank wishes to invest in any financial institution be it a bank, an insurance company, a stockbroker, a leasing company, rights, etc, then it needs to risk rate this investment at 100 per cent. For example if the particular financial entity they hope to invest in is Rs. 100, then they need to take Rs. 100 from its capital when calculating their capital adequacy ratio.
BoC’s Tier I Capital ratio is at 9.92 per cent. The minimum requirement is 8.875 per cent which means now they are roughly about 100 basis points above the minimum. But come end January next year, this minimum goes up above 10 per cent. So it is not very prudent for BoC to take up their rights in NDB during this time, an analyst noted.
The BoC has 9.91 per cent in NDB. Based on an analysis of top 20 shareholders as at July 31, state controlled entities have a combined stake of nearly 33.5 per cent in NDB.
NDB traded down on its rights issue price of Rs.105 during the past few days. Some analysts attribute this to the general weakness of the stock exchange. NDB’s 1-for-3 rights issue at Rs.105 was initially announced on June 19 when the NDB share price was Rs. 132.7.
NDB saw some heavy trading in their rights on Monday. There was net foreign selling of 1 million rights on the same day.
From September 26 till Tuesday, there was net foreign selling of 3.1 million rights. Tuesday also saw foreign holding of NDB rights at 5,222,267, down from 8,366,732 on September 26. Some 10.6 million shares were traded on Wednesday which also saw net foreign selling of 2.7 million rights on the same day.
After NDB’s price started trading under the rights price at Rs.103.7 and over 6 million NDB rights have traded during the past few days.
The last date of trading for rights was Wednesday with Thursday being the last date for payment for the rights. NDB’s total rights offered stands at 59, 154,354 shares.
As at July this year, two million shares were sufficient to enter the top 20 shareholders of NDB. As the fifth largest shareholder of NDB, Dr. Sena Yaddehige was entitled to 3.1 million rights. Dr. Yaddehige and related parties own 7 per cent in NDB.
Arjun Aloysius’ Perpetual Treasuries and Perpetual Equities with 5.7 per cent won’t be subscribing for this issue as Perpetual’s accounts have been frozen by the Central Bank to prevent siphoning off money gained from the infamous bond scam.
Rusi Captain and related parties own 9.6 per cent in NDB with NDB Deputy Charmain and Softlogic Holdings Chairman Ashok Pathirage and related parties owning 7.9 per cent.