IPO ANALYSIS OF JHIMRUK BIKAS BANK LIMITED

JHIMRUK BIKAS BANK LIMITED

Note: IPO applied for more than 50 units should be divisible by 10 and when applied for more than or equal to Rs 50,000 the payment should be made through account payee check.

Issue Manager: Growmore Merchant Banker Limited

Introduction of Jhimruk Bikas Bank Limited

Jhimruk Bikas Bank Limited, a one district operational financial institution of ‘B’ category licensed by Nepal Rastra Bank, was established on 2066/02/05 under the Company Act, 2063 and has been carrying out its activities as per the Nepal Rastra Bank Act 2058, and Bank and Financial Institution Act, 2063. It commenced its operation as one of the financial institutions of Nepal from 2066/08/29 after receiving a license from Nepal Rastra Bank as on 2066/08/16 and Company Registrar as on 2066/08/19. It is founded by promoters with long years of managerial expertise and having a strong background in financial and banking profession, health sector, tourism sector, overseas employment sector, education sector and in other various business sectors.

The Bank has been registered with authorized capital of NPR 100 million and currently holds issued capital of NPR 40 million and paid up capital of NPR 24 million. The Bank is firmly motivated to, develop, expand and facilitate the productivity of feasible manufacturing and to create so as to uplift the rural economy through agriculture, service, trade and industry by mobilizing the local human and capital resources.

The bank registered office is situated at ward no 1,  Dharmawati VDC Bagdula Pulchowk Pyuthan which is also the Head office of the Bank. Within the four years time, the company has also extended its services in Bhingri Bazar and Machhibazar of Pyuthan district. After Initial Public Offering (IPO), they are planning to further expand their network within the district and are also planning to opt for merge with other financial institutions.

There are no major shareholders in Jhimruk Bikas Bank Limited as per the Prospects

Board of Directors of Jhimruk Bikas Bank Limited

Mr. Begam Bahadur K.C., Chairman

Qualification: Graduate

Work Experience:   Principal of Janata Madhyamik Vidyalaya, Pyuthan

Mr.  Shekhar Chandra Pradhan, Director

Qualification:  School Leaving Certificate (SLC)

Work Experience :  Chairman of Mahendra Higher Secondary School; Secretary of Chamber of Commerce, Pyuthan; Councilor , Pyuthan Campus,Khalanga, Pyuthan.

Mr. Kali Bahadur K.C., Director

Qualification: Graduate

Work Experience: More than 20 years of experience in Nepal Khadya Udyog Sangh as an in charge officer.

Mr. Balaju Shrestha, Director

Qualification: Graduate

Work Experience:  Involvement in construction tender business and currently also working as treasurer of Pyuthan Chamber of Commerce.

Mr. Govinda Bahadur Karki,  Director

Qualification: Graduate

Work Experience:  District Treasurer of Rastriya Khelkud Parishad, Pyuthan, Secretary of Sworgadwari Bus Bewasaya Samiti.

Mr. Madan Bahadur K.C., Managing Director

Qualification:  Master of Public Administration (MPA)

Work Experience:  More than 22 years of working experience in Nepal Bank Limited; one year of experience as a Senior Manager at Malika Bikash Bank Ltd.; currently working as a managing director of Jhimruk Bikas Bank Ltd.

Board of Directors (BOD) shareholding in the bank as per Prospectus.

Management Team of Jhimruk Bikas Bank Limited

Mr. Madan Bahadur K.C., Managing Director

Qualification:  Master of Public Administration (MPA)

Work Experience:  More than 22 years of working experience in Nepal Bank Limited; one year of experience as a Senior Manager at Malika Bikash Bank Ltd.; currently working as a managing director of Jhimruk Bikas Bank Ltd.

Mr. Subha Chandra Shrestha, (Chief Operating Officer)

Qualification:  Graduate (Major in Commerce)

Work Experience: More than 30 years of working experience in Nepal Bank Limited.

Mr. Deepak Khadka, (Office Secretary/ Senior Loan Officer)

Qualification: Post Graduate (Major in Commerce)

Work Experience:  2 years of working experience as Deputy Director at Sworgadwari Multiple Campus and 8 years as in charge of Management Department.

Capital Structure

FINANCIAL HIGHLIGHT OF THE BANK

                                                                                                                  Figure in Rs “000

From the date of establishment, the bank’s paid up capital has been increasing which shows that the promoters have been expanding the bank size through their own investment gradually. Currently, the bank paid up stands at 60% of the issued capital. With the initial public offering (IPO), the company plans to par the capital structure with that of issuing capital. Similarly, observing reserve and surplus of the company, it had maintained a negative figure till the last FY 2068/69.

However, coming to this FY 2069/70 third quarter report, the bank has come to maintain NPR 4,577 thousand in reserve. If we closely observe and compare the data of reserve and surplus, the bank has maintained steady improvement, indicating progressively progress in the income flow of the company.

As the bank is only in its fourth year running, it is in expanding phase. The bank from the date of establishment has made good utilization of resources and in the current date also it has done so, as it CD ratio in the third quarter have increased to 75.09% from 74.49% of corresponding quarter. Despite maintaining near to parallel growth in both deposit and loan, the bank lacks behind in utilizing the resources fully as the CD ratio is below the 80 % benchmark, as per set of the NRB directives.

From the table, we see that the bank has made incremental in both Deposit and Loan but the growth in deposits was much higher than that of loans in the FY 2067/68. However, in the following  fiscal years, the company has made similar growth in both heading which indicates there has not been increased in the idle fund of the company.

Looking at the third quarterly report of this FY 2069/70, the bank loan portfolio is diversified into Home/ Housing loan (above 10 Miillion) with 2.92%, Term loan with  41.34%, Overdraft loan/TR loan/WC loan with 33.47% and other loans with 22.26%.

As the company has been maintaining sound growth in the interest income and sustaining lower interest expenses, it has been able to make a hefty and continuous growth in the operating profit before provision. With the aggressive increase in the loan and advance by the company from the FY 2067/68, the interest income has surged by 876.29% and 88.70% of the last two fiscal years respectively whereas the interest expenses growth only stood at 626.61% and 73.19% respectively.

However, in the current third quarter,  the growth in interest expenses have outweighed the interest income growth with a figure of 61.15% to 58.98% respectively; this scenario has shrunk the net interest income percentage from 38.72% to 37.89% in this third quarter of FY 2069/70 compared to the corresponding previous quarter.

Now if we look at the net write back, the bank has made a negative write back in the initial fiscal year however in the following fiscal year 2067/68, it maintained a positive write back which suggests  the company ability to improve its collection in bad loan. The improvement of bad debt collection in FY 2067/68 has ultimately helped to lower the company’s provision amount in the subsequent fiscal year also as the net write back to loan ratio has come down to -0.42% from -7.11%.

Currently in the third quarter also, the company net write back to loan ratio is below one percent i.e. at 0.41% and its Non performing loan is also at 0.25% which suggest that the company’s loan portfolio is in a sound position.

With the increase in operating profit before provision and improvement in the net write back, the company’s net profit has also made a gradual improvement. Though, the company has maintained a triple digit growth in the last FY 2067/68 and FY 2068/69, in the current third quarter its growth has shrunk to double digit figure of 98.49% which still is a healthy growth figure for a new company.

*The figure is in negative.

If we look at the Net Worth of the company, it has made steady climb but only in this third quarter it came above par value of Rs 100. Now, looking at the EPS, ROA and ROE, in the initial year the company’s all figures were in negative. However with the progress of banking activities, the company has come to maintain positive and gradual growth in all the indicators.

Looking at the overall financial highlights, the bank has come in par value only in the third quarter of the current fiscal year 2069/70. In the previous fiscal years, despite the increase in interest income, the bank couldn’t succeed to sustain in a positive position because of the heavy loss of the initial year. But, the steady progress in the banking performance in the following years has made the company able to recoup the loss suffered in the initial year and maintain a positive reserve and surplus in its balance sheet . So, the bank in the current scenario is just out of a wobbly start and is in a phase where it needs to build a sound foundation for the coming year ahead.

COMPANY’S WEBSITE: http://jhimrukbank.com.np

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