ICRA Nepal assigns [ICRANP-IR] A- issuer rating to NMB Bank; upgrades bond rating to [ICRANP] LA-  & Grade 4 to upcoming 40% right issue of Surya Life Insurance

ICRA Nepal Limited, the only credit rating agency of Nepal licensed by Securities Board of Nepal (SEBON), has assigned issuer rating of [ICRANP-IR] A- to NMB Bank limited (NMB). As per ICRA Nepal, rated entity carries higher than average credit risk, however, the rating is only an opinion on the general creditworthiness of the bank and not specific to any particular debt instrument. On the other hand, ICRA Nepal has upgraded the rating of subordinated bonds of NMB worth Rs 50 crore from [ICRANP] LBBB+ to higher grade at [ICRANP] LA- . As per the report, instruments with this rating carry moderate credit risk. The rating upgrade factors in the bank’s ability to maintain its assets quality (gross NPL of 1.20% on mid-Jan 2018) and return indicators in the post-merger era, despite sizeable credit book acquired from regional BFIs and their relatively weaker underwriting norms. However, the ratings are constrained by moderate funding profile of the bank, higher deposit concentration, cost of fund and base rate. The rating is also constrained by uncertain operating environment that the banks in Nepal are currently facing. ICRA Nepal Limited has also assigned IPO Grade 4 rating to the upcoming 40% right share of Surya Life Insurance Company Limited (SLICL), indicating average fundamentals. The process of right share issuance is currently pending approval from Securities Board of Nepal (SEBON). SLICL is proposing to come out with 40% rights issue of 28,87,500 numbers of equity shares of face value NPR 100/- each of worth Rs 28.87 crore to be issued to its existing shareholders at par. NIC Asia Capital Limited has been appointed as the issue manager. The grading factors in healthy premium growth of SLICL over past years (CAGR 53% over past 5 years ending FY2017, backed by healthy growth in new business premium (CAGR 58% over the same period). Healthy growth in new business premium indicates good market positioning of the company which is a positive from future growth perspective. The grading also considers adequate franchise network of the company (72 branches) across the country. The grading also factors in adequate reinsurance arrangements including catastrophic coverage provision. SLICL has earned net profit of Rs 5.22 crore in its 1^st quarter of the fiscal year 2074/75. After the issuance of 40% right shares, its paid-up capital will reach Rs 94.50 crore. Currently, its paid-up capital stands at Rs 65.62 crore. 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.