NATIONAL8 (Spotlight Weekly]

Change Of Guards

French investors decide to divest their shares in a leading joint venture bank in the country

By BHAGIRATH YOGI

Singh : Wanted transparency

After Nabil and Bank of Kathmandu, foreign investors in the Nepal Indosuez Bankóone of the leading joint venture banks in the countryóhave decided to exit. The news came as a shock to the new government led by Sher Bahadur Deuba but insiders said the French investor in the Bank had made up their mind for sometime now and only looking for an opportune moment.

The Credit Agricole IndoSuez of France, that owns 50 percent stakes in the Nepal IndoSuez, finally decided to divest its shares. One of the top ten banks in the world, the Credit Agricole had requested the government to raise its 50 percent equity to 67 percent in the Indosuez two years back but could not get approval. In the last year's budget, the government announced that foreign investors would be allowed to own majority stakes in joint venture companies. But due to lack of appropriate regulations the provision did not come into effect. When the French investors tried to raise the issue with top government officials they only received ëcold shoulder,' sources said. The French investors were, however, tight-lipped. Chief Executive Officer of the Bank, Mark Dumaz', was not available for comments.

In this year's budget, Finance Minister Dr. Ram Sharan Mahat proposed to grant foreign investors to raise their investment up to two-thirds in the total equity. This is exactly what the French investors were lobbying for the last two years. So, why did they choose to quit?

After taking over the Bank Indosuez-- the French company that invested in the Nepal Indosuez in the mid-eightiesó nearly two years back, the Credit Agricole made it clear that it wanted to divest it shares as per its policy due to the small economic size of Nepal."They said that due to small profit margins and small economy, their working style did not match here,"recalls Niranjan Tibrewala, who had served as director of the Nepal Indosuez Bank for more than eight years, until recently."In fact, if we ask foreign investors to come and invest here, we must give them a chance for comfortable exit as per their wish."

The Credit Agricole is now trying to divest its shares to some reputed and dependable banking group within the country. Sources said the group led by former chief executive officer of the Himalayan Bank Limited, Prithvi Bahadur Pande,' was likely to procure the shares divested by the Agrciole.

According to Tibrewala, there will not be any immediate negative impact upon the Nepalese economy due to the exit of the Credit Agricole."Our economy could not take any major benefit out of the excellent goodwill and vast business networks of one of the leading banks in the world."The Credit Agricole is known the world over for its expertise in private asset management, aircraft lease financing etc., among others.

"In fact, if we ask foreign investors to come and invest into the country, we must give them a chance for comfortable exit as per their wish."

Back home, general public owning shares in the Bank are worried about the future of their investment."We want that the French side should sell their shares to a reliable and competent party,"said Surendra B. Singh, one of the directos of the bank on behalf of the public shareholders."Unfortunately, we haven't been informed by the management in this regard as yet."

Sources said the meeting of board of direcrtors' of the Bank, scheduled on Wednesday, was expected to discuss the issue."Transparency in such matters is highly important. The public should be informed,"said Singh.

Now that the Indosuez has decided to pull out of Nepal, the bottomline is the new group to purchase their share and replace their position must possess attributes including untainted background in financial business, good knowledge and experience about Indosuez operations in Nepal, the vision to lead the bank into the new century and capability to mobilize competent professionals, said a Nepalese investor of the bank.

The French investors will be taking back a handsome return on their investment in Nepal. The initial French investment in the bank was around Rs 15 million. The present market value of the 50 percent shares of Nepal Indosuez Bank, owned by the Agricole, is estimated at more than Rs two billion. The total issued and paid up capital of the Bank at present stands at nearly Rs 170 million. The Indosuez is known the world over for its investment in human resources and interface with the latest technology. What it will be leaving behind is a good will and a battery of highly motivated Nepalese professionals who can work in any international bank with equal ease and competence. Whether the new management will be able to mobilize them for the benefit of the institution and the country remains to be seen.