MOUNT MAKALU DEVELOPMENT BANK LTD

MOUNT MAKALU DEVELOPMENT BANK LTD

 

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 Ltd.


Introduction of Mount Makalu Development Bank Ltd.


Mount Makalu Development Bank Ltd. was established in 2066/08/19 under the Company Act, 2063 and has been carrying out its activities as per Nepal Rastra Bank Act 2058, and Bank and Financial Institution Act, 2063. It commenced its operation  as  "B" Class (One District) financial institution of Nepal from 2067/04/05 after receiving a license from Nepal Rastra Bank as on 2067/03/30.

Mount Makalu Development Bank Ltd lies at Basantapur VDC of Terhathum district. Basantapur is small town which is located at the boarder of Terhathum, Dhankuta and Sankhuwasava district and identified as a tourism and commercial area of eastern development hill region.

The bank was mainly established to fulfill the financial needs of this place. With this ambition, some of intellectuals, merchants, socialists and common people of this area came together to establish Mount Makalu Development Bank Ltd.  From establishment, the company’s mission has been to collect unproductive saving of common people and use it in much more productive areas through the channel of financial market.

The Bank has been registered with an authorized capital of NPR 40 million and currently holds an issued capital of NPR 20 million and a paid-up capital of NPR 14 million.

The bank’s registered office is situated at Basantapur-4, Terhathum district, which is also the Head Office of the bank. Currently, the company is providing its services to customers through its two branches network.


Board of Directors of Mount Makalu Development Bank Ltd.

1. Mr. Hari Krishna Niraula, Chairman
Qualification: Master of Arts (MA)
Work Experience: Former chairman of Mount Makalu Saving and Credit Cooperative Ltd., Samaj Bikash Kendra and Mount Makalu Academic Foundation. Currently, he is also the campus chief of Basanta Multipurpose Campus. Apart from these, he has 22 years’ work experience in the field of education sector.

2. Mr. Kumar Khadka, Managing Director
Qualification: Masters of Administration (MBA)
Work Experience: He has been involved with the Bank from the inception as Managing Director. He had served in Officer level of Mount Makalu Saving and Credit Cooperative Ltd. He also holds 12 years of teaching experience.

3. Mr. Binod Das Gurung, Director
Qualification: Master of Arts (MA Anthropology )
Work Experience: He has worked in various NGOs and INGOs as researcher, coordinator and social scientist for nearly 15 years. He was also related with teaching profession for nearly seven years. Currently, he is also the managing director of Ekakrit Himalayan Farm.

4. Mr. Ganesh Prasad Baral, Director
Qualification: Master of Arts (MA Economics)
Work Experience: He holds the teaching experience of nearly 12 years. He was previously associated with Mount Makalu Saving and Credit Cooperative Ltd. as a member.

5. Mr. Lachhuman Tiwari ,  Director
Qualification: School Leaving Certificate, SLC
Work Experience: Former Chairman of Mount Makalu Saving and Credit Cooperative ltd. He has been involved with various social organizations for nearly 13 years.
  

Management Team of Mount Makalu Development Bank Ltd.

Mr.  Kumar Khadka (Managing Director)
Qualification:  Masters of Administration (MBA)
Work Experience: He has been involved with the Bank from the inception as Managing Director. He has worked as Officer level in Mount Makalu Saving and Credit Cooperative Ltd. He also holds 12 years teaching experience.

Mrs. Babita Bhattarai (Account/Credit Head)
Qualification: Intermediate of Commerce (I.com)
Work Experience: Mrs. Bhattarai has been working as Account/ Credit head of Mount Makalu Development Bank Ltd from the establishment. Prior to it, she served in Mount Makalu Saving and Credit Cooperative Ltd. for a service period of four years.

Mr. Suman Limbu ( Operation Incharge )
Qualification: Intermediate of Commerce (I.com)
Work Experience: Mr. Limbu has been working as Operation head of Mount Makalu Development Bank Ltd from the inception. Prior to it, he served in Mount Makalu Saving and Credit Cooperative Ltd. for a service period of four years.


Capital Structure

                   
FINANCIAL HIGHLIGHT OF THE BANK

                                        Figure in Rs “000”

Looking at the bank’s history, it is newly formed bank. Following its establishment, the paid-up capital of the bank has not been altered till date and currently it stands at 70% of the issued capital. With the initial public offering (IPO), the company plans to par the capital structure with that of the issued capital. Similarly, observing reserve and surplus of the company, it has sustained a healthy growth till date.

The double digit growth in the reserve and surplus suggest that the bank has been expanding its banking services aggressively. In the current scenario, if we look at the second quarter data, we witness that the bank has sustained 144.65% growth in its reserve size compared to the corresponding quarter.  

As the company hasn’t published its CD ratio of the previous fiscal years, we are not in position to comment on its fund utilization trend of prior fiscal years. However, if we observe the second quarters data, we find the CD ratio is behind the optimum level set by NRB at 80% and it has decreased by more than 10 percent; its signifies that the bank has  not been fully able to utilize its deposits which may attribute to a high cost of fund.

From the table, we see that the bank has been making increment in both deposit and loan but not to the level that is required for new banks. If we look into deposit, it has more or less static growth in the past two fiscal year and in current second quarter, its level has dipped below 50 percent.

Likewise, it loan growth figure is less impressive than that of deposit. Being a new bank, instead of increasing loan growth figure, it has a decreasing figure. In addition, the lack of optimum utilization of fund through loan distribution is surely to impact on its cost of fund as state above, which ultimately will result in lower profit.

Looking at the loan portfolio of the company, it still sustains higher exposure in Others loan i.e. 85.52%, though the figure is 5.5 percent down than that of previous second quarter data. Likewise, the bank has increased its exposure to Home/Housing Loan to 12.48% from that of 6.96% of second quarter of FY 2069/70. Similarly, it has made two percent exposure in term loan up from zero whereas decreased its exposure in Overdraft loan to zero from two percent.

In the past FY 2069/70, despite its contrasting growth gap between loan and deposit, the company still maintained a hefty growth in operating profit before provision than that of FY 2068/69. Attributed by the high spread, because of excess liquidity in the market, the bank was able to maintain such figure.

However, coming to the second quarter data of this fiscal year, the interest income has shrunk to 32.13% growth while its interest expenses has propelled to 76.90%. The outcome of these two figures are reflected on the operating profit before provision for the second quarter of this fiscal year which has dropped by 0.71%

Now if we look at the net write back, in the current second quarter it is tallied at zero which suggests the bank is having success in reducing bad loans. However, if we compare the figure of second quarter of FY 2069/70 with that of end data of that fiscal year, we come to realize that the in the last two quarters, the bank’s net provisioning amount has drastically increased to Rs 1.09 million from Rs 49 thousand.

In addition, the increase in the non performing loan of the bank from 0.18% to 0.40% in second quarter of FY 2070/71 outlines a contrasting view of the bank.

Moreover, the decrease in the provisioning amount has mainly attributed in propelling the bank’s net profit slightly  higher in this second quarter than that of the corresponding second quarter.

If we look at the Net Worth of the company, its figure is not one of the best among its competitors. Now, looking at the EPS, ROA and ROE till the second quarter of the FY 2070/71, we can see that, the increment has been on a smooth track.

However, it should be kept in mind that the BOD of this bank mainly consists of the directors with teaching and cooperative background that lack banking experience. In addition, the bank’s NPL is on the rise which can have drastic impact on its performance since its loan base is still small.

Despite its average performance, the IPO of this bank is still one of the attractive as it is the last company to float its primary shares for this fiscal year as per SEBON’s website. Along with it, looking at the market condition, where even the company having net worth below par is oversubscribed numerous times, the sentiment of the investors may uplift the value of this IPO rather than company’s performance.

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