Ekata Bikas Bank floats IPO worth Rs 8 crore from today
Wed, Jun 4, 2014 12:00 AM on IPO/FPO News,
Ekata Bikas Bank Limited has floated its Initial Public Offering (IPO) worth Rs 8 crore from today. (Click here for Offer Letter)
The primary shares is being floated at a face value of Rs 100 per unit, according to the offer letter published by the development bank headquartered in Butwal.
The issue will close on June 8, or June 18 at the latest.
Interested investors can apply for a minimum of 50 units and maximum of 1 lakh units among the total 8 lakh units, out of which 24,000 units have been set aside for the bank staff and another 40,000 for the mutual funds.
Securities Board of Nepal (SEBON) had granted approval to the IPO issue on May 13.
The development bank is in operation from May 15, 2011, since then it has always generated profits. The bank has collected Rs 1 arba 13 crore in deposit and granted a total of Rs 95 crore in loans and advances. The customer base of the bank has reached 16 thousands.
Currently the bank has seven branches and two extension counters. The scope of its operation is Dang, Rupundehi and Kapilvastu districts.
The bank has also launched IPO saving accounts for the general public to ease the IPO application process.
As per the third quarter unaudited financial report of FY 2070/71, the bank has earned Rs 1.24 crore as compared to Rs 0.65 crore of the corresponding last fiscal year.
Currently Ekata's paid-up stands at Rs 12 crore, and following the IPO, it is expected to rise to Rs 20 crore, the offer letter states.
It may be noted that ICRA Nepal, the only credit rating agency in the country, has assigned an IPO Grade 4, indicating below-average fundamentals to the IPO. 
ICRA Nepal assigns IPO grading on a scale of IPO Grade 1 through IPO Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. For the Grading categories 2, 3 and 4, the sign of + (plus) appended to the Grading symbols indicate their relative position within the Grading categories concerned. Thus, the Grading of 2+, 3+ and 4+ are one notch higher than 2, 3, and 4, respectively.
According to ICRA Nepal, the grading is constrained by EBBL’s limited track record and low seasoning of credit book (less than 3 years of operations), regional concentration of operations, high credit and deposits concentration, (top 10 depositors accounted for 32 percent of total deposit as on mid-Jan-14), lack of diversity in earnings, competition from commercial banks with wider product suite, higher portfolio vulnerability arising from exposure to hire purchase loan segment (around 26 percent as on mid-Jan-14) among ICRA Nepal graded entities and uncertain operating environment that banks in Nepal are currently facing.
The grading is also constrained by absence of strong promoter base. Nonetheless, the grading factors in healthy profitability indicators (PAT/ATA 1.47 percent as on mid-Jan-14), control on asset quality indicators (Gross NPLs 0.32 percent as on mid-Jan-14) leading to good solvency profile (1.67 percent as on mid-Jan-14), adequate proportion of low cost deposit base (CASA1 52 percent as on mid-Jan-14) and regulatory advantage available with ‘Schedule B’ Development Bank compared to ‘Schedule A’ Commercial Bank in the form of lower SLR/ CRR2 requirements.
ICRA Nepal further notes that, EBBL’s ability to maintain asset quality indicators and increase its client base/ presence judiciously would have a bearing on the overall financial profile. The proposed IPO would enable the bank augment its capital base in line with its plans to increase scale of operations at a rapid pace over the medium term.
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