"10.35% ADBL Rinpatra 2083" is open for application from today; Find necessary information to make your investment decision

Tue, Jan 28, 2020 11:52 AM on Bonds & Debentures, Exclusive, Stock Market,
"10.35% AD...

Company profile

The Agricultural Development Bank Limited (ADBL) was established in 1968 as an autonomous institution, to function as a financing vehicle for the agriculture and allied sector. It was set up under the provisions of the then Agricultural Development Bank Nepal (ADBN) Act, 1967 and functioned under a not-for-profit development agency model until 1985, when it also started limited commercial banking operations.

 The bank was converted into a public limited company in July 14, 2005 and was brought under the domain of the Banks & Financial Institutions Act (BAFIA), which repealed the ADBN Act. Since then, ADBL has been functioning as a class A commercial bank licensed and regulated by the Nepal Rastra Bank. ADBL is one of the three class A commercial banks with majority holding by the Government of Nepal. ADBL has 51% shareholding from the Government, the only promoter of the bank with the rest of the stake held by the general public.

The bank is spread across the country through the network of 252 branches. ADBL has two subsidiary companies vis-à-vis:

  • Biogas and agricultural machinery development P. Ltd.
  • Fund Management Company

Objective

About the issue

Agricultural Development Bank Limited (ADBL) has published an offer letter for the issue of ‘10.35% ADBL Rinpatra 2083’. The issue will be open from Magh 14, 2076. The closing date for the issue is set at Magh 17, 2076 which can be extended up to Falgun 14, 2076 in case of under subscription.

Agricultural Development Bank is issuing a total of 25 Lakh units of debentures at par value of Rs.1000 per unit. The total value of the issue is Rs.2.50 Arba and will be providing 10.35% interest rate. The debenture will mature in 7 years i.e. in 2083.

Out of the total issue, 10 Lakh units (40% of the issue) will be issued to the general public while the remaining 15 Lakh units (60% of the issue) will be privately placed.

NIBL Ace Capital Limited has been appointed as the issue manager. Interested investors can apply for minimum 25 units and maximum 250,000 units of debentures.

 

Capital structure

Shareholding structure

The above table excludes Rs. 5,432,712,000 irredeemable non-cumulative preference shares put in by the Government of Nepal (GoN).

Primary shareholders

Board of Directors

Management Team

*There are 2,298 employees in total.

Rating

ICRA Nepal has assigned [ICRANP-IR] A (pronounced ICRA NP issuer rating A), to Agricultural Development Bank Limited (ADBL) indicating an adequate degree of safety regarding timely servicing of financial obligations. Such issuers carry a low credit risk.

ICRA Nepal has also reaffirmed the rating of [ICRANP] LA (pronounced ICRA NP long-term debt rating A) to the proposed subordinated debenture programme worth NPR 2,500 million of Agricultural Development Bank Limited (ADBL). Instruments with this rating are considered to have an adequate degree of safety regarding the timely servicing of the financial obligations. Such instruments carry a low credit risk.

Credit strengths

  • Strong ownership with the Government of Nepal as the promoter
  • Strong branch network contributing to a highly granular lending portfolio
  • Strong capitalisation and solvency profile
  • Good profitability profile despite high operating costs

Credit challenges

  • NPLs and credit cost could rise amid high interest rate scenario
  • Changing regulatory landscape could affect growth and scale economies
  • Concentrated deposit profile with high cost of deposits; albeit with industry average CASA mix
  • Relatively moderate control measures on an expanded operation, increases the operational risk

Source: ICRA Nepal Rating (https://icranepal.com)

Financial indicators

Market share

Debenture redemption reserve

Source: Company Prospectus and ICRA Nepal rating report