IPO of Ganapati Microfinance opens tomorrow; Things to know for prospective investors

Company profile

Ganapati Microfinance Bittiya Sanstha Ltd. is a “D” class National Level Microfinance Institution incorporated on June 27, 2016, licensed by Nepal Rastra Bank (NRB) on November 15, 2016 and commenced its operation from Dec 9, 2016 under Bank and Financial Institution Act 2006.

It is primarily engaged in providing microfinance loan based on the Joint Liability Group (JLG) model with each group consisting of minimum five members. It has its registered office in Suklagandaki Municipality, Tanahun, Nepal. As on October 17, 2018 it has loan portfolio of Rs 620.08 Mn and deposit base of Rs 153.75 Mn; and have 11,402 members and 8338 borrowers. The microfinance currently provides microfinance services to more than 14 thousand individuals from its 28 branches located in 15 districts.

Guheswori Merchant Banking and Finance Ltd (32.14%) and Mr. Yubraj Bhandari (14.29%) are the major shareholders of the company.

Objective of the issue

About the issue

Ganapati Microfinance Bittiya Sanstha Limited is issuing 3,35,000 units ordinary shares worth Rs 3.35 crore to the general public from Baisakh 9, 2076. The early closing date of this IPO issue is on Baisakh 12, 2076 and if the issue is not subscribed till Baisakh 12 then this issue can be extended upto Jestha 7, 2076.

Out of the offered 3,35,000 units; 5,175 units have been allotted for the employees of the company and 16,750 units have been allotted for the mutual funds. The remaining 3,13,075 units are for the general public.

Applications can be place for minimum 10 units and maximum 1,500 units. NIBL Ace Capital Limited has been appointed as the issue manager for the IPO issuance.

The paid-up capital will reach Rs 10.35 crore after the issuance of the public shares. After the IPO issue; public holding will be 32.37% and promoters holding will be 67.63%.

Care Ratings Nepal Limited has assigned grading of “CARE-NP IPO Grade 4” to the proposed Initial Public Issue of Ganapati Microfinance Bittiya Sanstha Limited (GMBSL). “CARE-NP IPO Grade 4” indicates Below Average Fundamentals.

Capital structure

Shareholding structure

Primary shareholders

Board of directors

Management team

CARE Nepal Rating

CARE Nepal (CRNL) has assigned grading of "CARE-NP IPO Grade 4" to the proposed Initial Public Issue of Ganapati Microfinance Bittiya Sanstha Limited (GMBSL). "CARE-NP IPO Grade 4" indicates Below Average Fundamentals. Ganapati Microfinance Bittiya Sanstha proposes to issue 3.35 lakh numbers of equity shares of face value of Rs.100 each at par aggregating Rs. 33.50 million. 

Strength and opportunities

• Institutional promoter as well as experienced board and management team
• Ability of the company to grow business over the short track of operations:
• Adequate Capital Adequacy ratio (CAR)
• Comfortable Liquidity Profile
• Diversified credit portfolio
• Adequate geographical diversified reach in its area of operation

Weakness and threats

• Short track record of operations and small scale of operation
• Weak financial performance due to initial year of operation, however improving over the period
• Increasing Non-Performing Loans (NPLs) to total loan
• High Dependence of resource profile on Banks and Financial institution borrowings
• Exposure of regulatory risks related to microfinance industry
• Inherent risk involved in the microfinance industry
• Competition from other MFIs and Co-operatives

Source: (http://careratingsnepal.com/rating-list/)

Financial performance

Conclusion

Microfinance is one of the most pursued sector by investors in Nepali capital market and one of the reason is quick market price appreciation. Now, that all the information is available, will you be applying for Ganapati Microfinance's IPO?

If you are applying, then you can read "How much to apply?" to decide the quantity. 

Source: Company prospectus and CARE Nepal Rating