Microfinance stocks more attractive to investors
KATHMANDU:
The primary subscribers of shares of microfinance institutions have seen their initial investment grow by multiple-folds in less than a year, with investors falling for their handsome dividends.
The share price of three microcredit institutions that were listed at Nepal Stock Exchange (Nepse) in the past one year have all crossed over Rs 800 as of late January. The stocks of Sana Kisan Bikas Bank, Rural Microfinance Development Center and Swarojgar Laghubitta Bitta Bikas Bank are being traded at Rs 1,030, Rs 825 and Rs 815, respectively, at Nepse at present.
Sana Kisan Bikas Bank had issued shares to the public back in July and Swarojgar Laghubitta Bikas Bank had launched its Initial Public Offering (IPO) in April 2013 at a face value of Rs 100. Rural Microfinance Development Center had offered shares at a premium rate of Rs 180 per unit in July.
“The financials of the microcredit institutions is encouraging and their dividend payment rate is also relatively higher,” pointed out president of Nepal Investors’ Forum Raj Kumar Timilsina, explaining the reason for such a rise in microfinance stocks.
The regulatory paid up capital requirement of these class ‘D’ financial institutions is Rs 10 million to Rs 100 million based on its area of operation. However, the average profit earning of the 10 listed microfinance institutions stand at more than Rs 20 million.
These institutions basically borrow from larger financial institutions at a lower rate and lend micro amounts to numerous borrowers at higher interest rates. Microcredit institutions are mostly operating in remote areas to provide the rural population basic financing facility to improve their living standards.
“Except for a few, dividend payout of most commercial banks was insignificant but microfinance institutions are giving more than 15 per cent as dividend, which has attracted investors,” he said.
So far, nine listed microfinance institutions have announced dividend, which range from 15 per cent to
48 per cent.
The performance of microfinance institutions has surpassed many commercial banks at Nepse. Among the 30 commercial banks listed at the stock exchange, share price of 13 banks at present is less than the lowest price of the listed microfinance institutions.
Moreover, the inflated price of these stocks in the secondary market has been able to reel in hordes of investors in primary issues of microfinance institutions of late. Since April 2013, Nepali capital market has witnessed seven IPOs of the microcredit institutions.
All of the issues were oversubscribed by manifold the offered amount. The IPOs of RMDC and Sana Kisan Bikas Bank were oversubscribed by 11 times and 30 times, respectively. Likewise, the public had oversubscribed the offerings of Naya Nepal Laghubitta Bikas Bank, Kalika Microfinance Development Bank and Mithila Laghubitta Bikas Bank by more than 50 times. Moreover, the recent IPO of Nagbeli Microfinance Development Bank has raked in almost Rs one billion for the offering worth Rs 4.3 million.
Furthermore, the stocks of Naya Nepal Laghubitta Bikas Bank and Kalika Microfinance Development Bank that were listed at Nepse last week are not being traded. The investors are unwilling to let go of these shares at the maximum debut price allowed, that is below Rs 350 for both these stocks.
Source: THT
