ICRA Nepal assigns Grade 3 to the proposed 25% right issue of Gandaki Bikas Bank

ICRA Nepal Limited has assigned IPO Grade 3 rating to the upcoming 25% right share of Gandaki Bikas Bank Limited (GDBL), indicating average fundamentals. The process of right share issuance is currently pending approval from Securities Board of Nepal (SEBON). GDBL is proposing to come out with 25% rights issue of 4,609,816 numbers of equity shares of face value NPR 100/- each to be issued to its existing shareholders at par. As per Icra Nepal, The average fundamental grading factors in synergy in terms of future growth and business prospect, following the merger between two established regional players (erstwhile Fewa Bikas Bank and erstwhile Gandaki Bikas Bank1). Integration challenges, though present, remains moderate due to similar business and ownership profile of the merging entities. Strong capitalization, experienced management team and sound reputation of the bank in regional level remain positive for incremental growth prospect of GDBL. The grading also takes into consideration the adequate franchise network (50 branches across 20 districts) and strong retail presence of the bank. Gandaki Bikas Bank, after merger with Fewa Bikas Bank, has earned net profit of Rs 54.06 crore in last FY 2073/74. Its current paid-up capital stands at Rs 1.84 arba and after issuing 25% right shares, its paid-up capital will reach Rs 2.30 arba. As per NRB’s directive for national-level development banks, GDBL should increase its paid-up capital to Rs 2.50 arba. 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 better position within the grading categories concerned.