HIDCL awaits govt’s approval to initiate merge & acquisition process with NIFRA

KATHMANDU: Hydroelectricity Investment and Development Company (HIDCL) is preparing for merger NIFRA. Following Nepal Rastra Bank (NRB) opening ways for the merger of two large banks and financial institutions established to invest in infrastructure in Nepal, these two firms have started merger and acquisition process and are awaiting approval from the government.

Arjun Kumar Gautam, chief executive officer at HIDCL, said that the process of merger will proceed with approval from the Ministry of Energy, Water Resources and Irrigation and the Ministry of Finance.

After the BFIs regulator said, the situation has come to surface to merge with similar other institution. Since the majority of the investments are from the government, the approval of the government is necessary, he said. In the upcoming general meeting of HIDCL, the proposal to merge will be submitted for approval.

The monetary policy of the current fiscal year introduced by the NRB has opened the way for Nepal Infrastructure Bank (NIFRA) and HIDCL, which are run by public private investment, to merge. Although HIDCL seems ready to go for the merger, however, NIFRA yet made public its views on the matter.

Although the central bank did not mention the name of the organization in the monetary policy, NIFRA and HIDCL are the only ones that invest only in infrastructure. NIFRA has got permission to invest in big infrastructure like roads, cable cars, big hotels, industries and hydropower, while HIDCL has been established to invest in hydropower projects. Compared to HIDCL, NIFRA’s investment area is somehow wider.

The government owns only 10 percent in NIFRA and the rest of the investment is invested by banks and financial institutions, insurance companies and industrialists. Similarly, HIDCL has 80 percent ownership by the government, Employees’ Provident Fund, Citizens Investment Fund and National Insurance Corporation. The remaining 20 percent is invested by the general public.

While there is a debate that there is no need for two banks and financial institutions to invest in infrastructure, the central bank has cleared the way for the merger of NIFRA and HIDCL through monetary policy. HIDCL has recently come under the regulation of the Central Bank.

In the point number 96 of the monetary policy, it is mentioned that in order to increase the investment capacity of the Nepal Infrastructure Development Bank, which is established to invest in the infrastructure sector, it will be encouraged to increase the paid-up capital through mergers and acquisitions with other financial institutions established and operating in order to invest in the infrastructure sector itself.

NIFRA has a paid-up capital of Rs 21.6 billion. Similarly, HIDCL has 18.7 billion rupees. If the two institutions merge, their paid-up capital will reach Rs 45 billion rupees.

Fiscal Nepal |
Monday August 1, 2022, 05:13:30 PM |

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