Nepal Securities Board Grants Permission to Machhapuchchhre Bank for Issuing Non-Convertible Preference Shares

The Nepal Securities Board has granted permission to Machhapuchchhre Bank to issue non-convertible preference shares (PNCPS) worth NPR 3 billion. With this approval, the bank will issue 30 million shares at a face value of NPR 100 each.

The dividend rate for the preference shares to be issued by the bank is set at 8.25%, and this dividend will only be distributed in years when the bank has a profit. The responsibility for managing the issuance and sale of the shares has been assigned to Laxmi Sunrise Capital.

With this, Machhapuchchhre Bank becomes the fifth commercial bank to issue non-convertible preference shares. Previously, banks such as Nabil Bank, NMB Bank, Siddhartha Bank, and Kamana Sewa Development Bank had already received permission for issuing such shares.

Recently, banks have started using non-convertible preference shares as an alternative source to strengthen their capital reserves. After purchasing such shares, investors cannot demand a return of their principal, and the money remains as permanent capital for the bank unless the bank decides otherwise.

Due to the non-convertible nature, if the bank does not have profit in any given year, no dividend will be distributed, and there will be no accumulation of dividends from the previous year. However, when the bank makes a profit, preference shareholders must be paid dividends at the specified rate before dividends are distributed to common shareholders.

According to the board, these shares can only be sold to a maximum of 50 institutional investors. Ordinary public investors will not be allowed to invest in these shares. The process must be completed within two months from the date of permission.