Ekata is closing IPO today; oversubscribed by over 2 times in 2 days

Sun, Jun 8, 2014 12:00 AM on IPO/FPO News,

Sharesansar, June 8:


Ekata Bikas Bank Limited is closing its Initial Public Offering (IPO) worth Rs 8 crore today, citing oversubscription of the issue.

The IPO, floated at a face value of Rs 100 per unit on June 4, has drawn Rs 17.2 crore in just two days, according to NMB Capital, which is managing the issue.

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 worth deposits and granted a total of Rs 95 crore loans and advances. The customer base of the bank has reached to 16 thousands.

Currently development bank headquartered in Butwal has two branches and nine service centers. The scope of operation is spread over three districts: Dang, Rupundehi and Kapilvastu.

The bank has also launched IPO saving accounts for the general public to ease the overall 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.

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.