Shanta Bahadur Shrestha
Chairman
NIDC Board of Directors
We are not in aggressive lending and what we have invested in the real estate sector is far below what is allowed by NRB.
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Nepal Industrial Development Corporation Ltd (NIDC), once a comatose public enterprise, has now turned around to become a vibrant company. It had an accumulated loss of Rs 1.41 billion in 2005-06, but it is now expecting a net profit of Rs 300 million in 2010-11.
“We are going to make profit this fiscal year and hopefully declare dividend also,†said Shanta Bahadur Shrestha, Chairman of NIDC Board of Directors and joint secretary at the Ministry of Finance, at the 53rd anniversary function of the corporation on June 15, 2011. Highlighting the recent achievements, company’s General Manager and Director Shivjee Roy Yadav noted that the company’s net worth per share that was a negative Rs 193.47 at the end of 2005-06 has now turned positive to Rs 192.87, by mid-April 2011.
Behind the newly-found optimism is a long story of struggle and perseverance. Set up in 1959, this first development finance companybloomed till the early 1990s before sliding into a financial mess. Eventually, the government on February 24, 2004, decided to stop this public enterprise from extending any new loan and to focus on just recovering its investments. The plan was to ultimately liquidate the company.
Though the government decision was made on the basis of a recommendation from PriceWaterhouseCoopers, the company’s management was finally able to convince the government that it can be revived and the government stands to lose if the company is liquidated. Then, a new decision was made by the government on March 2, 2009, that allowed the company to work as a deposit taking institution. Thus, the company started functioning as a bank and this change made the company rise from its deathbed and re-establish itself as a vibrant financial institution. NIDC commenced its banking service from February 8, 2010, and now it is a major provider of funds in the inter-bank market, Yadav claims. Meanwhile, the company focused on recovery and sold some of its investments in stocks. As a result, it fully repaid all the loans it had to pay to the Nepal Rastra Bank and the government. “This is indeed an achievement,†says Yadav, Had the government gone ahead with the liquidation as per the PriceWaterhoseCoopers recommendation, the Nepal Rastra Bank and the government would not have got their money back. Rather, they were required to inject additional capital to clear various other liabilities of the corporation.
Today, NIDC has an authorised capital of Rs 1.20 billion of which Rs 600 million is issued and Rs 415 million is paid-up. Its non-performing loan has reduced to 75.6 percent by mid-April 2011 from 99.79 percent a year ago. This has further reduced to 70 percent by mid-June and the target is to reduce it further to 35 percent next year, says Yadav. This year’s revised estimate of the profit is lower than the initial estimate. The initial target was Rs 570 million but that could not be achieved as the plan to realise the loan of Himal Cement by selling the mortgaged assets could not go ahead. Similarly, the plan to sell the corporation’s shares in Nabil Bank and NIDC Capital Market could not implemented, explains Yadav. He expects to make these sales once the country’s property and share markets revive.
Established on June 15, 1959, the company’s mission is to contribute to industrialisation of the country through industrial project financing. Initially, established as a corporation under a special law the Nepal Industrial Development Corporation Act 1959, it was later registered under the Company Act and in 2006 it was made a national level development bank under the Banks and Financial Institution Act 2006.
From its beginning to mid-April 2004, NIDC invested more than Rs 6 billion in 1,520 industrial projects in different parts of the country. The company estimates that in those projects about 80,000 people received direct employment while 350,000 others got indirect employment.
NIDC today offers its banking services from its head office in Kathmandu and two regional offices in Biratnagar and Pokhara. The plan is to start banking services also from the Nepalgunj and Dhangadhi offices with approval from the central bank. Meanwhile, the company has started ATM services by setting up an ATM station at the central office and the plan is to set up ATMs in other branches as well in other places of Kathmandu. 9 AGMs in One Go
One major recent development of the company is the AGM held on May 7, 2011. It is a major development because there has been no AGM for last nine years from 2001-02 through 2009-10. From the next year, the AGM will be regular, hopes Yadav. One major decision taken at the AGM is to change the company’s name into NIDC Bank Ltd, subject to approval from the relevant authority.
Currently 99.26 per cent of the corporation’s ownership remains with the government while 0.74 per cent stakes are with the public. Therefore, the company’s shares are not traded in the stock exchange though it is listed there. Presenting the annual report to the shareholders in the May 7 AGM, the company’s chairman Shrestha informed about the plan to issue shares through further public offerings so as to increase its paid-up capital.
Shrestha says, “We are not in aggressive lending and what we have invested in the real estate sector is far below what is allowed by NRB.â€
According to Shrestha, the company is also planning to offer services like 365 days banking, evening counter, Internet Banking, SMS Banking, Remittance Service, Mobile Banking among other new products. n
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Financial Statistics of NIDC as of third quarter of 2010/11
Rs in million
| Particulars | Fiscal years | |||||
| 2005/06 | 2006/07 | 2007/08 | 2008/09 | 2009/10 | 2010/11 by mid April | |
| Paid-up Capital | 415.8 | 415.8 | 415.8 | 415.8 | 415.8 | 415.8 |
| Net Profit | (602.8) | 87.5 | 797 | 172.2 | 354.5 | 87.4 |
| Accumulated Profit (Loss) | (1416.2) | (1347.3) | (595.5) | (459.3) | (179.4) | (109.5) |
| Reserves | 195.9 | 213.4 | 372.8 | 407.3 | 478.2 | 495.6 |
| Networth/Share Rs | (293.46) | (172.67) | 46.44 | 87.48 | 171.86 | 192.87 |
| Loan Investment | 1712.4 | 1466.8 | 1329.7 | 1258.5 | 1118.6 | 1273.6 |
Source: NIDC Press Release on the 53rd anniversary day.
