ICRA Nepal assigns IPO Grade 4 rating to the 2.34 crore unit right share issue of Nepal Credit and Commerce Bank

ICRA Nepal has assigned (ICRANP) IPO Grade 4 rating to the Rs 2.34 arba worth right share issue of Nepal Credit and Commerce Bank Limited. Instruments with this grading are considered to have below average fundamentals. NCCB is proposing to come out with right shares of 2.34 crore units of face value Rs 100 each. 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. The below average fundamental grading factors in NCCB’s long track record, adequate market share and improved profitability level maintained in the past 1-2 years. Adequate capitalization profile and adequate franchise is likely to support the incremental growth prospects of the bank. The grading also factors in low credit concentration risk. However, the grading remains constrained by inferior assets quality indicator of NCCB, and relatively high delinquency level especially after the merger in FY2017. The grading also remains constrained by moderate funding profile of the bank vis-à-vis the industry. The bank fares moderately in terms of current and savings account (CASA) deposit proportion (32% in mid Oct 2017 and 35% in mid-Jan 2018 vs. industry average of ~43%) and deposit concentration (top 20 depositors accounting for 33% of total deposits as on mid-Oct 2017). NCCB underwent merger with 4 class B Banks to raise its paid-up capital in line with revised regulatory requirement. The merger was concluded under the leadership of NRB, with the intent to diversify the ownership profile of pre-merger NCCB. Following the merger, the stake of NB Group (controlling interest in pre-merger NCCB) diluted to 16%. Post-merger joint operation commenced from January 01, 2017. As on mid-Oct 2017, NCCB has 51:49 promoter-public shareholdings. Individuals and private companies associated with NB group hold ~16% stake while remaining promoter stake is diversified across >1,000 promoters comprising of small stakes by individuals and institutions. Notice