Network Microfinance Bank Limited’s Placement of NMBL on the Non-Compliant Segment of the Exchange under Listing Regulation 30(2)
Karachi: This in reference to your letter No.KSE/Gen-3584 dated June 7, 2011.
It may be recalled that last year when the Karachi Stock Exchange (Guarantee) Limited (“the Exchange”) had issued a Show Cause Notice No.KSE/Gen-4414 dated June 22, 2010, Network Microfinance Bank Limited (NMBL) vide its letter No, NMBL/KSE/CEO/810 dated July 1, 2010, had requested for an exemption from compliance with Regulation 30(2) of the Listing Regulations on plausible grounds mentioned in NMBL’s said letter. Based on these grounds, the Exchange was pleased to grant an extension up to June 30, 2011 Copy of NMBL’s letter dated July 1, 2010 is enclosed for your ready reference.
There have been positive developments since then. A Group of Investors known as Auriga Group (hereinafter referred to as “the Group”) has submitted an Expression of Interest to NMBL’s holding company i.e. Jahangir Siddiqui and Co. Limited (“JSCL”) to acquiring all the 21,245,184 shares of NMBL from JSCL constituting 70.82% of the total issued shares of’ NMBL. This material information was disseminated to the Exchange vide NMBL’s letter No. NMBL/KSE/CS/153-11 dated May 19, 2011, a copy of which is enclosed for your ready reference.
The Group has also approached the State Bank of Pakistan (“State Bank”) for permission to conduct due diligence of NMBL. The State Bank also requires a resolution from NMBL’s Board of Directors for permitting the Group to conduct due diligence. Accordingly NMBL’s Board of Directors have passed a resolution for such purpose at its meeting held on June 6, 2011, which information was also communicated to the Exchange vide NMBLs letter No. NMBL/KSE/CS/168-11 dated June 6, 2011. Copy of NMBL’s letter dated June 6, 2011 is enclosed.
According to the papers submitted by the Group to the State Bank, the Group intends to convert NMBL from a district level microfinance bank to a national level microfinance bank and to extend NMBL’s operations throughout the Country. In NMBLs letter dated July 1, 2010, the attention of the Exchange was drawn to the fact that NMBL was the only district level microfinance bank operating in Karachi, whereas other microfinance banks are operating on country level basis. In NMBL’s letter dated July 1, 2010, it was also mentioned that with the limited district level operations and average loan size of Rs: 20,000/-, there was no concept of profitably during the first seven to ten years of the operations of NMIBL which was not possible In comparison to country level microfinance banks having large capital base These limitations are now expected to be overcome by conversion of NMBL from district level to country level microfinance bank.
As per the information received from discreet sources, the Group seems to be confident of achieving the country level status for NMBL, On achievement of country level status, NMBL will be able to expand its operations with larger limits for financing and reduced costs of operations and to also tap larger deposits from small and medium size individuals and corporate Investors. This is expected to bring a turn around in the operations of NMBL.
The other positive development is that the Group has already submitted a Business Plan to the State Bank, according to which NMBL is expected to generate projected profits in the first year of operations after the conversion.
With the above achievements, NMBL is most likely to become a fully compliant listed company. Therefore, it would not be in the public interest to place NMBL on Non-Compliant Segment of the Exchange. Moreover, if NMBL is placed on Non-Compliant Segment at this stage, its share price quoted on the Exchange might decline sharply.
In view of the position enunciated above, we request the Exchange to kindly grant a further extension of one year i.e. June 30, 2012 before making any final decision of placing NMBL on Non-Compliant Segment.
For avoidance of doubt, we wish to clarify that NMBL is only the Target Company and is not a party to the intended transaction between JSCL and the Group, nor it is concerned with the commercial terms and conditions thereof. The request for extension is being made only in the public interest and the interest of the capital market.
Should you need any clarification, please do not hesitate to let us know.
For more information, contact:
Network Microfinance Bank Limited
202, Azayam Plaza,
Opp. FTC Building S. M.C.H.S,
Shahrah-e-Faisal, Karachi, Pakistan
PABX: +9221 34311723-25
Fax: +9221 34311722