FPO Analysis of Reliance Lotus Finance Ltd.
Sun, Dec 20, 2015 1:01 PM on Latest, Exclusive, IPO/FPO News, Financial Analysis, Featured, Company Analysis,
Overview
ICRA Nepal Limited (ICRA Nepal) has assigned "IPO Grade 5", indicating poor fundamentals to the proposed Further Public Offering (FPO) of Reliance Lotus Finance Ltd. 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.
Company Profile
Reliance Lotus Finance Ltd. was established in 03/23/2066 under the Company Act, 2063 as the then “Reliance Finance Ltd.” as a category ‘C’ financial institution. The institution merged with “Lotus Investment Finance Ltd.”, another category ‘C’ financial institution on 1/25/2071 and has been carrying out its activities as per Nepal Rastra Bank Act 2058 and Bank and Financial Institution Act, 2063 as a national level finance company. It has its corporate headquarter in Pradarshani Marg, Kathmandu.
Areas of Operation
Reliance Lotus Finance Ltd. has operations in 4 districts. These districts are: Kathmandu, Kaski, Chitwan and Lamjung. Currently the company has a total of 5 branches of which 2 branches are in Kathmandu and the remaining 3 are outside Kathmandu.
Capital Structure
The company has authorized capital of Rs.650 million and issued and paid-up capital of Rs.320 million. After the FPO, the company’s issued and paid-up capital will reach Rs.371.43 million.
Reliance Lotus Finance Ltd. currently has a promoter public shareholding ratio of 81.50:18.50. The current FPO has been announced to change this ratio to the minimum regulatory requirement of 70:30.
Board of Directors
The company has 8 members in its board.
CEO’s Profile
Mr. Anil Shrestha, Chief Executive Officer
Mr. Shrestha has been associated with Reliance Lotus Finance Limited Since 2009. He is also experienced as a director at NLG Insurance Co. Ltd and as General Secretary at Nepal Finance Institution Association.
He holds an M.B.A degree from Tribhuwan University. He is also a Business Communication (EIB) with High Honor and Honor in English Program from University of California Extension Center, River Side, California, U. S. A.
Financial Highlights
Share Capital and Reserve & Surplus:
Operating and Net Profits:
Key Ratios:
For Investors
Reliance Lotus, although a national level finance company, has very limited operations. It is limited to conducting business in just 4 districts through 5 branches (including corporate headquarter). The company’s profitability is constrained and its asset quality is questionable. The company faces tremendous challenges going forward.
However, the company, in its capital plan, proposes a 20% stock dividend to its shareholders in the current fiscal year. This can be an attraction for investors to invest in the FPO.
