Nepal Investment Bank FPO Overview: A safe investment for a long term

Nepal Investment Bank Ltd. (NIBL), previously Nepal Indosuez Bank Ltd., was established in 1986 as a joint venture between Nepalese and French partners. Nepal Indosuez Bank Ltd. was renamed Nepal Investment Bank Ltd. in 2002 following the exit of Credit Agricole Indosuez from Nepal Indosuez Bank Ltd.

The bank’s corporate headquarter is located in Durbarmarg, Kathmandu.

The bank has 46 branches and 83 ATMs at 67 locations. The bank has 14 branches inside Kathmandu valley and 32 branches outside Kathmandu valley.

The bank currently has a public promoter share ratio of 20:80. The current FPO has been conducted to raise the public shareholding to 30% to meet regulatory requirements.

CEO’s Profile

Mr.Pandey, a commerce graduate from BESC College, Calcutta and MBA from Patna University, replaced Prithivi Bahadur Pande as the Chief Executive Officer of the Nepal Investment Bank Ltd.

He began his banking career from 1987 as a Credit Analyst in Nepal Industrial Development Corporation. Immediately thereafter, he joined Nepal Investment Bank (then, Nepal Indoseuz Bank) as Chief of International Banking and worked there for four years before joining Himalaya bank in 1992 as Chief of Marketing and Credit Department. He also worked as a Branch Manager of New Road Branch for a year. He later joined Nepal Investment Bank in 2002 in the post of Assistant General Manager and was later promoted to Deputy General Manager in 2004 and to General Manager in 2006.

After his six years of the successful stint as the General Manager, he was promoted to the post of Chief Executive Officer in the July 2012.

Board of Directors

Financial Highlights

Analysis

The bank currently has paid-up capital of Rs.6.34 billion and it will reach Rs.7.25 billion after the FPO. This is just short of the minimum capital requirement set by NRB of Rs.8 billion that is to be met within FY 2073/74. The bank’s reserves will receive a huge boost of Rs.4.54 billion from the premium collected from the FPO. Its reserves is projected to grow from Rs.3.48 billion in FY 2071/72 to Rs.10.20 billion in FY 2072/73.

The bank’s profitability will not grow at the same rate as the growth in its equity. The best way forward for the company will be to use its additional funds to acquire an existing firm. This will introduce new cashflows, increase profitability and will also help it to diversify.

There are also some concerns regarding the bank’s performance due to the earthquake and blockade. However, these are not problems exclusive to the bank alone. Management further assures us that delinquency rates that shot up following the two disasters are slowly coming down and are within control.

The bank has distributed an average of 38% dividends in the past 5 years. This comprises of 22% stock dividends and 16% cash dividends. With a dividend payout ratio of 75%, the bank can be expected to pay dividends of 30% on average.

The FPO can be a safe investment for a long term investor.