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Vol.
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Business News |
While the old and government owned banks are closing down their branches, later-day entrants into the country's banking sector have been going on expanding their branch network. Nepal Industrial and Commercial Bank Limited (NIC) has opened its branch in Birganj. Headquartered in Biratnagar, the bank now has five branches - the others being in Kathmandu, Dharan and Birtamod. According to executive director of the bank KR Iyer, yet another branch is to be established within two months in Butwol.
Meanwhile, Nepal Grindlays Bank too has opened its another branch - now in Bhairahawa. The Nepali central bank has policy to allow a bank open a branch in an urban area only on the condition of opening another branch in a rural area. However, the banks have a tendency to fulfil the requirement by opening the rural branch in an upcoming urban center.
Chaudhary Group, the owner of Singha Brewery (P) Ltd., has tied up with India's beer and liquor major Shaw Wallace to brew and market various brands of beer in Nepal. According to unconfirmed report quoting reliable sources in the Group, the Singha brand is to be discontinued, and Shaw Wallace's brands Hyward 5000, Hyward 2000, Hi-Fi and Royal Challenger are to be brewed in Singha Brewery's plant.
Another Nepali brewery, Himalayan Brewery Ltd., has been brewing Hayward 1000 exclusively for export to India, but the brand to be brewed by Singha Brewery are to be made available in the Nepali market as well. The sources at Chaudhary Group indicate that the brands will be launched in Nepal before forthcoming Dashain festival. For this, a marketing team from Shaw Wallace is expected in Nepal very soon.
Chaudhary Group's tie up with Shaw Wallace comes soon after the process of handing over Himalayan Brewery's management to an Indian party was cancelled just about two months back. The Indian party that was to take up management in Himalayan Brewery was said to be closely associated to Shaw Wallace. Meanwhile, it is rumored that Himalayan Brewery is about to liquidate. However, the same could not be confirmed as nobody was available in the company's office for comment.
Singha Brewery has been operating at a very low production level though the figures are not disclosed. The brand is available in only a few outlets, and the company sources say, some of the production is exported to India. The new alliance is expected to push the market share of Singha Brewery up by bringing out mild as well as strong beers to cater to all segments of the market. While Hayward belongs to strong segment, Hi-Fi and Royal Challenge are mild beers.
Financials of HISEF (Rs. in million) 1997/98 1998/99 1999/2000 Deposits 391.8 503.3 473.2 Loans 320.6 439.2 408.7 Pre-tax Profit 11.4 14.7 16.0 Net Worth 41.9 50.7 62.2 * * After the proposed capitalization Himalayan Securities and Finance Ltd. concluded its 6th AGM recently with shareholders approving the proposals to change the company's name to HISEF Finance Ltd. and to distribute stock dividend of 25% out of the profits of FY 1999/2000.
With this, the company's paid up capital reaches Rs. 48 million from Rs. 39 million as a step to follow NRB's directive that requires the company to have Rs. 60
million paid up capital by fiscal year 2001/02. HISEF had raised the paid capital through stock dividend also in FY 1997/98.
According to the Board of Directors Report presented to the shareholders, the deposits with the company at the end of fiscal year that ended on mid-July 2000 stood at Rs. 473.2 million as compared to Rs. 503.2 million last year.
This reduction was a result of deliberate effort in view of less investment opportunities available in the economy, which was going through a phase of investment slump, the report states. However, the company has managed to increase its profit before tax from Rs. 14.7 million in 1998/99 to Rs. 16 million in 1999/2000, it said.
In what is regarded as an unprecedented and risky move for the health of the country's shaky financial sector, the government last month appointed a new governor of the central bank by unceremoniously sacking the incumbent who has now approached the Supreme Court for redressal of his grievance.
 Dhakal: At the helms
Rawal: Out in six months |
In a writ petition filed at the apex court, Dr. Tilak Rawal, who was appointed the Governor of Nepal Rastra Bank (NRB) some seven months back, has questioned the legality of the government's move and claimed that former bureaucrat Dipendra Purush Dhakal, who is now appointed the NRB Governor, had violated the discipline by failing to attend the NRB Board meeting for fifth consecutive time during the period he (Dhakal) was the member of NRB Board. Rawal's removal is attributed to his failure to develop a cordial rapport with Mahesh Acharya, the Finance Minister. Acharya had resigned from the Finance Minister's post when the Council of Ministers under the then Prime Minister K P Bhattarai appointed Rawal the NRB Governor despite opposition from Acharya. Later, when the ruling party changed its leadership electing GP Koirala the Prime Minister, Acharya was reappointed Finance Minister. Rumours of the governor being changed were going around ever since and the much-awaited financial sector reforms were put in a limbo. While Rawal came from the banking background (he had served as the chief of Agriculture Development Bank and Rstriya Banijya Bank), Dhakal had retired last year as Secretary in the Ministry of Tourism. It was during his tenure in the Tourism Ministry that Nepal observed the Visit Nepal Year 1998. Prior to being appointed NRB Governor, Dhakal was a member of the Board of Directors of NRB. |
Nepal Merchant Banking and Finance Ltd. (NMBF) has declared to offer 20 percent as dividend to its shareholders out of the profits of fiscal year 1999/2000.
The decision was taken at the company's fifth AGM held recently. The paid up capital of NMBF is Rs. 75 million. According to a press release issued by the company, its total deposits were worth Rs. 764 million and investments Rs. 537 million at the end of the year ending on July 16, 2000. The net and operating profits of NMBF stood respectively at Rs. 22.1 m and Rs. 30.8 m for the year, the release adds.
How much does HMG return to the industries in a year because of tax exemption? Perhaps the most reliable answer can be found in the annual reports of the Auditor General. In his latest report (the 37th), the Auditor General has stated that the One Window Committee (OWC) has paid Rs. 163.93 million in total to various industrial units over the period of last four years.
In 1998/99, OWC had decided to pay a total Rs. 52.64 million to various industrial units, but out of this amount Rs. 30.76 million was not paid as the government had no money available for this purpose.
In his comments about the decision regarding tax concessions, the Auditor General has stated in his report that though the decisions are supposed to be made well in advance of the date when the duty falls due to be paid by the industrial unit, in practice they are taken very late. Giving example of 31 industrial units operating in the fiscal year 1998/99 with income tax and sales tax exemption, the report says that in case of three units the decision to grant the tax exemptions was taken four years after the units started production. Similarly, the decision was taken after three years in case of four units, after two years in case of nine units and after one year in case of six units. In 1999/2000, an industrial unit based in Chitwan was granted income tax exemption after being in production for 12 years.
In its comments after the performance audit conducted on involvement of the private sector in hydro-electricity generation, the report states that there is no uniformity in the conditions put to the foreign and Nepali investors involved in hydro-electricity generation. The government has gone out of the Electricity Act and Regulation to grant excess facilities and concessions to the foreign investors while denying such favours to domestic investors.
The Act provides for 15 years tax exemption to power company beginning the date of power generation. After 15 years, they have to pay income tax at a rate 10 percent lower than the prevailing corporate tax rate. According to the report, while HMG has signed agreements with foreign investors agreeing to charge corporate income tax on their earnings fifteen years later at rates 10 percentage points less than the prevailing corporate income tax rate, the license to the domestic power developers has a provision that requires them to pay corporate income tax at rates 10% less than the prevailing rate.
Thus, if the prevailing corporate income tax rate is 30% the foreign investors or their joint venture companies will have to pay only 20% of their net income as tax, whereas the domestic investors will have to dish out 27%. Pressures are mounting on the government to review the agreement with the foreign investors after two of the projects have already started generating electricity and reducing the requirement for load-shedding in the coming winter. But such a move would send wrong signals to the future investors about the integrity of Nepali government, it is feared.
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