PEs Improving
The financial condition of a number of Public Enterprises (PEs) is beginning to show improvement. Some profitable companies have increased their profits while loss-making ones have reduced their losses.
The profit of Nepal Airlines (NA) has exceeded its own targets. In the first six months of the current fiscal year, the company's income was Rs. 2,196 million, which is Rs. 240 million higher than NA's own targets for the period. According to Gautam Das Shrestha, the managing director of NA, this increase in profits is due to the growth in tourism after the restoration of peace, the increase seen in overall business field and NA's own initiatives to cut costs.
NA has easily exceeded its target of carrying 47,548 passengers and 993 metric tons of cargo during the six-month period. As a result, the airlines has managed to drastically reduce its overdraft loan of Rs. 1,450 million to Rs. 850 million. NA has also cut down on the less profitable flights like the Kathmandu-Mumbai one and increased flights to more profitable destinations like Dubai and Kuala Lumpur .
Similarly, Nepal Telecom (NTC) has targeted a profit of Rs. 6 billon this year while its profit was Rs. 5 billion last year. According to Sugat Ratna Kangsakar, the managing director of NTC, the company had been able to expand its telephone services and people's tendency to use telephones has also increased due to the restoration of peace.
Also, Nepal Oil Corporation (NOC), which was making losses for a long time is at a monthly break-even position now. The main reason given for this is the drop in crude oil prices in the international market in the last few months. But, Iccha Bikram Thapa, the spokesperson for NOC, says that though the company was in profits in February, it will be troubled in the future because crude oil prices have gone up again in March.
Further, the Ratriya Beema Sansthan, which had made profits of Rs. 80 million in non-life insurance last year, is set to meet its target of making Rs. 90 million profits this year, says Bhoj Raj Sharma, the chairman and administrator of the company.
The Nepal Rastra Bank (NRB) will also exceed its profit target this year, says Bidyadhar Mallik, the Seretary of Finance and a member in the Board of Directors of the Nepal Rastra Bank. The bank had exceeded its profit-target by Rs. 1 billion last year and that amount will come to the government as dividend, says Mallik.
Qatar Air in Search of GSA
Qatar Airways has removed Zenith Travels as its General Sales Agent (GSA) in Nepal . According to sources, this decision was announced through a letter sent by the CEO of Qatar Airways to the Chairman of Zenith Travels, Joy Dewan, on February 13.
But, as both parties in this deal have refrained from making public statements, no one seems to have any idea about why the airways decided to suddenly change its GSA. Qatar Airways is reputed to be one of the best managed airlines in the world and Zenith Travels was appointed its GSA in 1998.
According to sources, the parties severed their ties because Qatar Airways refused to compensate Dewan after the offices of Qatar Airways at Siddhi Bhawan were severely vandalised by mobs when the manpower companies were attacked on 16 Bhadra 2061 after twelve Nepalis were massacred by terrorists in Iraq .
There has also been dispute over the ownership of an office being built for Qatar Airways at Hattisar. According to sources, Dewan wanted to withdraw from the partnership after the parties had arguments over minor points like the set up of the office. Since the office is jointly built, there is now a new controversy over its ownership and the construction of the building has been halted.
But Dewan says that he has no dispute with Qatar Airways and he opted out of the partnership on his own will. "We still have good relations with Qatar Airways. All the rumours about any dispute between us are false," claims Dewan.
Dispute on Shanghai World Expo Participation
The selection procedure for Nepali companies to participate in the Shanghai World Expo, the largest trade fair in the world, has come under fire from architects and engineers. They have claimed that since the Trade Promotion Centre (TPC) only looked at the matter from a business perspective while selecting the participant company, the process was flawed. Engineers and architects have submitted a petition to the Prime Minister to rectify this situation.
When the TPC called for applications to select participant, only five responses were submitted. But, according to Bibhuti Man Singh, the president of the Society of Nepalese Architects (SONA), the selection should have been done through a free competition on a larger scale to match the massive scale of the event. Engineers and architects are demanding that Nepal 's pavilion at the Expo be designed purely by Nepali engineers, architects and designers and they should be selected through an open competition.
However according to Narayan Shrestha, chief of TPC, the selection process is not going to be rolled back as it was carried out strictly as per the World Exhibition Rules, 2062.
The Shanghai World Expo will be held for six months from May to October 2010 and it is expected that 195 countries will participate in the event attracting nearly 70 million visitors. Similar expos were held in Hannover , Germany in 2000 and in Japan in 2005. Nepal 's participation in the Hannover Expo is regarded as a success while the one in Japan a failure.
Restrictions on Margin Lending
To control the excessive oversubscription in the Initial Public Offerings (IPOs) of shares, the Nepal Rastra Bank (NRB) has issued directives to banks and financial institutions restricting them from extending loans to invest in IPOs.
Such practice of the banks and finance companies, known as margin lending, had caused excessive oversubscription in the IPOs, making it very costly for the companies to raise funds by floating shares to the general public. In some instances, the cost was higher than the amount raised by the company.
According to the directives, banks and finance companies cannot provide loans for this purpose during the first seven days of the IPO. Under the current rules, companies going public should keep the IPO open for a minimum of five days and a maximum of 30 days. However, as the shares issued by companies in the primary market are normally sold out within five to seven days of the issue, this rule will effectively end margin lending in the primary market, except in case of very large issues.
In another point of the directive, NRB has asked the banks and finance companies to provide such margin lending up to 50 per cent only. Previously, some banks and finance companies were providing even 100 per cent loan by deducting the interest in advance.
According to another point of the directive, the issue manager cannot provide any loans to subscribe to shares for which it is the issue manager.
However, the NRB is still mulling over the ways to restrict the margin lending against the security of shares being traded in the secondary market. According to an NRB source, the NRB is hesitating in this issue because the secondary market is in the declining phase at present and if it goes further down after such a restriction is imposed, it will put NRB in an uncomfortable situation.
Media Marketers Organise
Marketers of various media houses who had formed an association, recently held their first Kathmandu meet late March.
According to Tirtha Karki, President of Media Marketing Association, Nepal (MMAN), 95 members participated in the meet which was addressed by prominent marketing experts.
MMAN is to work for development of professionalism among media marketing, says Kakri.
Corporate Kaleidoscope
l Surya Nepal (P) Ltd. has become the first Nepali company to receive Social Accountability Certification SA 8000-2001 from DNV, one of the world’s leading certification bodies. According to the company, the certification is issued on the basis on an audit carried out in December 2006. This certification is regarded as the testimony of adherence to universal human rights compliance in the workplace and commitment to social responsibility towards the community.
SNPL has already received ISO 9001 and ISO 14001 among other certification from national and international bodies.
l Everest Bank Ltd. is planning to add 20 more branches in the coming two years. This was revealed by the bank’s Chairman BK Shrestha at a ceremony recently when the 20 th branch of the bank was inaugurated at Balaju by SC Gupta, the Chairman and Managing Director of India’s Punjab National Bank, which is the joint-venture partner in Everest Bank Ltd. With 20 branches already, Everest Bank has become the largest private sector bank of Nepal in terms of branch network.
