Applications for 10% Sunrise Debenture 2080 opens tomorrow; Things to know before investing

Company profile

Sunrise Bank Limited (SRBL) was registered on Shrawan 28, 2063 and had received an approval from Nepal Rastra Bank as a commercial bank on Ashwin 20, 2064. The formal operation started from Ashwin 25, 2064.

It is the 23^rd commercial bank of Nepal and according to CARE Nepal’s report, the bank as on mid-July, 2018 had an asset size of Rs 82 bn and its market share of deposits is 2.81% and of loans is 2.88%.

Mergers and acquisitions:

1. Narayani National Finance
2. NIDC Capital Markets Limited
3. NCM Merchant Banking Limited

According to unaudited report of SRBL for second quarter of FY 2075/76, the bank had reported 33.75% rise in the comprehensive income. Further details available here.

Subsidiary of SRBL

Sunrise Capital Limited (78.571% ownership of SRBL)

About the issue

Sunrise Bank is issuing Rs 1 arba worth of debentures from Chaitra 20, 2075 to the individual as well as institutional investors. The debentures that cost Rs 1000 a unit will have a maturity period of 5 years which will have 10% interest yield every year and the interest shall be paid semi-annually.

Out of the total Rs 1 arba worth debentures, its 40% i.e. Rs 40 crore of the debentures have been reserved for private placement whereas the remaining Rs 60 crore worth of debentures will be issued for institutional investors.

The issue will close by Chaitra 25, 2075 at the earliest and could be extended till Baisakh 19, 2076. Prabhu Capital Limited is the issue manager for the debenture program for which the general public can submit applications for minimum 25 to maximum 4 lakh units.

Sunrise Bank with its paid up value of more than Rs 8 arba currently provides services from its 103 branches, 28 branchless banking units, 3 extension counters and 118 ATM outlets.

Capital structure

Shareholding composition

Board of Director

Management Team

Primary Shareholders

Credit Rating

CRNL has assigned, “CARE-NP A- (A minus)” to the proposed Subordinate Bond “10% Sunrise Debenture 2080” issue of Sunrise Bank Limited (SBL). CRNL has also reaffirmed Issuer Rating of “CARE-NP A- (Is)” assigned to Sunrise Bank Limited. The instrument with this rating are considered to offer adequate degree of safety regarding timely servicing of financial obligations, in Nepal. Such instrument carries low credit risk.

Strengths:

- Long track record, experienced promoters and management team

- Adequate capitalization

- Diversified and high geographical coverage through branches

- Stable growth in advances and deposits

- Stable profitability parameters in spite of marginal decline

- Diversified loan portfolio and low advances concentration

- Moderate CASA (Call and savings account) ratio

- Moderate liquidity profile

Weaknesses

- Moderate asset quality parameters and increase in write offs during last two years

- Moderate deposits concentration

- Intense competition

- Exposure to regulatory risk related to industry

Source: CARE Nepal Ratings (http://careratingsnepal.com/rating-list/)

Financial performance

Conclusion

A lot of commercial banks are issuing debentures back-to-back with maturities of 5 to 10 years and interest rates ranging from 10% to 10.5%. The 10.25% Global IME debenture’s issue just closed, the 10% NMB debenture is still open for application and 10% Sunrise debenture will be opening from tomorrow.

The commercial banking sector of Nepal is the most heavily regulated sector and therefore are considered prudent in their activities. However, even among commercial banks, which bank you choose are affected by a myriad of factors. The fundamental numeric information is given above. The subjective factors are at your discretion. Mix these both and make an informed decision.

Source: Company prospectus and CARE Ratings Nepal