ICRA Nepal assigns IPO Grade 3+ to RMDC proposed IPO

Mon, Jun 24, 2013 12:00 AM on IPO/FPO News,

ShareSansar, June 24:

ICRA Nepal has assigned an IPO Grade 3+ to the proposed initial public offering (IPO) of Rural Microfinance Development Centre Limited (RMDC), indicating the company’s average fundamentals.

ICRA Nepal assigns IPO grading on a scale of 1 (strong) to 5 (poor). The plus (+) sign appended to the grading symbols 2, 3 and 4 indicates their relative better position within the respective grading categories.

The average fundamental grading to the IPO was assigned keeping various factors into account such as RMDC’s long track record in the microfinance activities, established relationship with various entities engaged in microfinance business, strong institutional promoters and management team, low funding cost and adequate loan underwriting and monitoring process.

RMDC has proposed an Initial Public Offer of 1,528,800 numbers of equity shares of face value NRs 100 each with a premium of NRs 80 per share for general public and 31,200 numbers of equity shares of NRs 100 each to its employees.

So far RMDC has been able to maintain good asset quality profile with zero default. RMDC is registered as a Class D financial Institution and engaged primarily in providing wholesale lending to MFIs in Nepal. RMDC has long track record of microfinance activities in Nepal and has established relationship with various entities engaged in microfinance business (as on mid-Jan-2013 RMDC has 112 MFI partners of which 75 are active borrowers).

Rural Microfinance Development Centre Limited (RMDC) was promoted by institutional promoters with Nepal Rastra Bank having 6.58% stake, 13 Class A Commercial Banks 90.57%, 5 Class D Microfinance Institution 2.42% and Deposit Insurance and Credit Guarantee Corporation (DICGC) 0.43%.

RMDC is engaged in the business of providing microfinance access to rural poor households, especially to women via wholesale lending to MFIs like rural development banks, microfinance development banks, rural cooperatives and NGO financial intermediaries and operates in all districts of Nepal.

RMDC is the implementing agency for the Rural Microfinance project funded through an ADB loan.

The paid up capital of RMDC was Rs 320 Million as on 15th July 2012 and reached to NRs 364 million by end of third quarter (15th April 2013) after injection of NRs 14 million (with premium of NRs 25.48 million) and NRs 30 million (with premium of NRs 24 million) by Siddhartha Bank Ltd and International Finance Corporation respectively.

During the year ended July 15, 2012 RMDC reported a net profit of NRs. 125 million. During Q1 2012-13 RMDC reported PAT of NRs 70 million.

RMDC has been able to maintain healthy lending spreads (around 5-6%) supported by lower funding cost, control operating expenses and credit provisioning however income profile remains highly concentrated to fund based activities. RMDC’s return on net worth was around 14-15% over last 2-3 years.

Meanwhile, RMDC is waiting for final approval from SEBON to issue primary shares to the general public.