NEA bond to mature without any trading


    KATHMANDU: Nepal Electricity Authority (NEA)’s debentures issued five years ago will be redeemed without being traded even once at the secondary market.

    The tenure of Nepal Bidhut Pradhikaran Rinpatra 2069 issued by NEA will be over by mid-April 2013, which is less than three months away, but like every other debt instrument listed at Nepal Stock Exchange (Nepse), it has yet to see the trading floor.

    Nepal Electricity Authority’s five-year debenture worth Rs 1.5 billion was listed at Nepse in June 2008 which can be redeemed after mid-April.

    “We have already deposited the money required to pay back the debenture holders at NMB Bank so after the maturity of the debenture they can get repaid,” said deputy managing director of Nepal Electricity Authority Lawa Ghimire.

    NMB Bank had managed the debenture issue in 2008. The debenture worth Rs 1000 per unit offered 7.75 per cent fixed interest for investors, paid on a half-yearly basis.

    “The debenture issue was well received by investors at the time because the interest offered was better than the interest offered by fixed deposits,” added Ghimire.

    In the secondary market, at present, there are 13 debentures belonging to 10 companies — nine of commercial banks and one of NEA — but none of these bonds have ever been traded. The listed corporate debentures amount to Rs 4.97 billion. In addition to corporate debentures, there are government bonds worth Rs 22.4 billion in the secondary market which also never get traded.

    “There is lack of interest among investors regarding bonds as most investors prefer equities,” pointed out share analyst Rabindra Bhattarai.

    Banks usually issue debentures to raise funds through debt instruments to maintain the capacity to extend loans.

    “Nepali investors do not maintain portfolio of investment so their investment is concentrated on stocks,” said Bhattarai who is also the managing director of Securities Research Center and Services. “Hopefully, the entry of more mutual funds in the capital market will stimulate bond trading as mutual funds are not concentrated on equity instruments only,” he added.

    More commercial banks are opting to issue debentures this fiscal year to expand their lending capacity.

    Last fiscal year too debentures worth Rs 1.2 billion of three banks applied for issue approval for the very reason.

    Recently, Nepal SBI Bank (NSBIL) and Laxmi Bank had issued debentures. Nepal SBI Bank’s 10-year debenture offered eight per cent coupon rate, while Laxmi Bank’s seven-year bond also offered eight per cent coupon rate.

    Source : The Himalayan Times