CARE Nepal assigns Grade 4+ to the IPO of NIC Asia Laghubitta; Rating indicates below average fundamentals

Tue, Dec 31, 2019 11:24 AM on Credit Rating, IPO/FPO News, Latest, Stock Market,
CARE Nepal...

CARE Ratings Nepal Ltd. (CRNL) has assigned grading of „CARE-NP IPO Grade 4+‟ to the proposed Initial Public Offer (IPO) of NIC Asia Laghubitta Bittiya Sanstha Ltd. (NALB). The grade assigned to any individual issue represents a relative assessment of the „fundamentals‟ of the issuer. NALB proposes to issue 4.755 Million shares of face value of Rs.100 each at par aggregating Rs. 475.50 Million. 

Key Grading Weaknesses

  • Concentrated resource profile with high dependence on Banks & Financial Institutions (BFIs) borrowings Short track record of operation including moderate market share in term of deposit and loan portfolio
  • Competition from other MFIs and Co-operatives
  • Inherent risk involved in the microfinance industry
  • Exposure to regulatory risks related to microfinance industry

Key Grading Strengths

  • Strong institutional promoter
  • Experienced board members and management team
  • Geographical diversification of business
  • Comfortable capitalization level
  • Considerable growth in business over short period of time however, slight decrease in loan and advance at the end of Q1FY20
  • Comfortable Liquidity Profile
  • Good asset quality being initial year of operation and low seasoning of the loan portfolio
  • Improved financial performance over the period
  • Diversified sector wise credit portfolio distribution

About the Company

NALB is a “D” class National Level microfinance institution incorporated on July 25, 2017, licensed by Nepal Rastra Bank on November 24, 2017 and commenced operation on November 28, 2017. It is 100% subsidiary company of NIC Asia Bank Ltd. and primarily engaged in providing microfinance loan based on Joint Liability Group (JLG) model with each group consisting of minimum five members. As on October 17, 2019, it has Rs 1,005 Mn paid up share capital which held by promoter shareholder. After issue of proposed IPO, the share capital of the company is expected to be Rs 1,480 Mn which will be held by promoter and public shareholders in 67.87:32.13 ratio.