'10.5% NIB Debenture 2082' opens from tomorrow; See the information you need to make an informed decision

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Thu, Jun 6, 2019 1:16 PM on Company Analysis, Exclusive, Latest, Stock Market,

Company profile

Nepal Investment Bank Limited (NIBL), previously Nepal Indosuez Bank Ltd., was established in 1986 as a joint venture between Nepalese and French partners. In April 2002, the French partner, Credit Agricole Indosuez (holding 50%), sold its stake to a group of companies comprising of bankers, professionals, industrialists and businessmen of Nepal. The name of the bank was then changed to Nepal Investment Bank Limited. The bank is promoted by a large number of insurance companies, retirement fund and investment companies, the most prominent being Rastriya Beema Company Limited (12.42%).Shares of the bank are distributed among promoters and the public, in the ratio of ~69:31, and the shares are listed in Nepal Stock Exchange. The registered office of the bank is in Durbarmarg, Kathmandu.

Nepal Investment Bank Limited (NIB) in the process of acquiring Jebils Finance Limited (JEFL) and both have announced their Special General Meeting (SGM). The swap ratio for the process of acquisition has been determined at 100:33 i.e. 100 shares of JEFL will be converted to 33 shares of NIB for the process of merger.

The bank’s profit has decreased from Rs 2.83 arba in the third quarter of the fiscal year 2074/75 to Rs 2.56 arba in the third quarter of the fiscal year 2075/76. The banks profit declines mainly due to huge provision of possible losses (Impairment charges) of Rs 92.40 crore.

The bank’s deposit rises by meager 3.99% to Rs 1.42 kharba whereas loans and advances have also increased by 4.82% to Rs 1.24 kharba in the third quarter. The net interest income (core business income) of the bank has also increased by 19.26% to Rs 4.91 arba from Rs 4.11 arba of the corresponding quarter.

The bank’s paid up capital stands at Rs 12.58 arba with Rs 12.48 arba as its reserve. The Non-Performing Loan (NPL) rises massively to 3.04%.

Market share

Objective

About the issue

The applications for the debenture issue will be open from 24th Jestha, 2076 (7th June, 2019). The early closing of the issue is on 28th Jestha, 2076. If the issue is not fully subscribed till the early closing, it can be extended up to 22nd Asadh, 2076.

NIB is issuing 20 lakh units debenture at par value of Rs.1000 each to raise debt worth Rs.2 Arba. The debentures will offer an interest rate of 10.5% p.a. and will mature in a period of 7 years. Out of the total units, 800,000 units will be offered to the general public will remaining 1,200,000 units will be privately placed. Amongst the units offered to the general public, 5% i.e. 40,000 units have been reserved for mutual funds.

Siddhartha Capital Limited has been appointed as the issue manager for the debenture issue.

Applications can be placed for minimum 25 units and maximum 100,000 units.

ICRA Nepal has assigned [ICRANP] LA+ to the proposed subordinated debenture program of Nepal Investment Bank Limited (NIBL). Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk. ICRA Nepal has reaffirmed the issuer rating for NIBL at [ICRANP-IR] A+. The rated entity carries average credit risk.

Capital structure

Shareholding composition

Primary shareholders

Board of Directors

Management team

ICRA Rating

ICRA Nepal has assigned [ICRANP] LA+ (pronounced ICRA NP L A Plus) to the proposed subordinated debenture program of Nepal Investment Bank Limited (NIB). Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligations. Such instruments carry low credit risk.

ICRA Nepal has reaffirmed the issuer rating for NIB at [ICRANP-IR] A+ (pronounced ICRA NP Issuer Rating A Plus). The rated entity carries average credit risk. The issuer rating is only an opinion on the general creditworthiness of the rated entity and not specific to a particular debt instrument. ICRA Nepal has also reaffirmed the rating on NIBL’s existing NPR 750-million subordinated debentures at [ICRANP] LA+.

Strengths

  • Strong market positioning, being one of the largest private sector commercial banks with ~5.6% share in industry credit and deposits.
  • Established track record (operating since 1986)
  • Moderate growth in recent periods
  • Diversified network, along with the experienced management team
  • Comfortable capitalisation profile, is expected to provide adequate growth opportunities to the bank going forward
  • Stable net interest margins (NIMs), healthy fee-based income and low operating costs, which have led to adequate earnings profile among peers
  • Presence of institutional promoters—Rastriya Beema Company Limited, a state-owned insurance company, with ~12% stake, among others— with representation on the bank’s board.

Weaknesses

  • Spike in the bank’s non-performing loans (NPLs) in recent periods along with the expectation of further stress in asset quality, given the sharp increase in interest rates in last two years
  • The bank’s 0+ days delinquency is higher than its peers (~14% as of mid-October 2018 including NPLs of 1.26%)
  • High customer concentration risks (~33% of credit and ~30% of deposits among top 20 customer groups as on mid-October 2018)
  • Relatively modest deposits profile among top-tier banks of Nepal, leading to slightly higher cost of funds
  • Probable systemic risks emanating from the mismatch in credit and deposit growth in the industry over the last few years

Source: https://icranepal.com/releases.php

Financials

Source: Company prospectus and ICRA Nepal rating report