Financial Times

Central Bank probes Janashakthi sale
By Duruthu Edirimuni
The Central Bank is probing the Janashakthi Insurance sale of National Development Bank (NDB) shares to clarify whether the buyer secured the stock in excess of the stipulated amount under the Banking Act and also whether the buyer is GoldQuest. “We are investigating the transaction that transpired with the NDB shares to see whether it points to one or many shareholders.

We want to see whether the shareholders have exceeded the limit of 10 percent,” a senior Central Bank official told The Sunday Times FT.
Industry sources said the authorities were concerned that the buyer might be GoldQuest, the controversial multilevel marketing company, or connected to it.
This came on the back of speculation in the stock market about Janashakthi selling part of its stake at NDB Bank to a foreign buyer, alleged to be a GoldQuest-connected party based in Malaysia.

“They [Central Bank] are following the NDB sale closely, because they feel that a GoldQuest-front company bought the shares. The regulator does not want GoldQuest at NDB because of the multilevel marketing schemes that they are [allegedly] involved in,” one industry source said. The Central Bank official said it had received reports of one of the buyers being a front company for GoldQuest.

“The two firms that purchased the shares are Fast Gains [believed to be a front company] and Credit Suisse. The Central Bank wants to find out if Fast Gains exceeded the 10 percent limit on shareholding [and whether it is connected to GoldQuest],” the industry source said.

GoldQuest was instructed to reduce its 13 percent stake in the bank to 10% in accordance with the new amendments to the Banking Act, last year. The new amendments in section 12 (1C) bars any individual, company or a partnership from holding more than 10 percent in a licensed commercial bank without prior approval from the Monetary Board.

With the sale of a 15% stock that Janashakthi held in NDB, its stake is now reduced to 2.5%. Janashakthi still holds more than all the board directors, who together have less than 0.03 percent or 15,050 shares in the Bank collectively.

“As a group, we felt the time was right to exit the stock. Through the sale we strengthened our liquidity and cash positions while realising substantial capital gains in excess of Rs.750 million,” Ramesh Schaffter, Director Janashakthi told The Sunday Times FT.

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