NAYA NEPAL LAGHUBITTA BIKAS BANK LIMITED

NAYA NEPAL LAGHUBITTA BIKAS BANK LIMITED

*None of the Mutual Funds have applied for the IPO of this company till date.

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

Issue Manager: NMB Capital Limited


Introduction of Naya Nepal Laghubitta Bikas Bank Limited

Naya Nepal Laghubitta Bikas Bank Limited was established in 2065/05/26 B.S. Under ‘Company Act, 2063’. Then coming to 2065/11/11, under Bank and Financial Institutions Act (BAFIA) 2063 it registered in Nepal Rastra bank as ‘D’ category financial institutions.

The bank currently operates in 10 districts i.e. Kavrepalanchok, Ramechhap, Sindhuli, Mahottari, Dhanusha, Siraha, Saptari, Sunsari, Morang and Jhapa. The microfinance development bank registered office is situated at Kavrepalanchok, Dhulikhel-6 , which is also the central office of the Bank.

The bank was primarily established with the aim of encouraging, helping and financially empowering the poor people of Nepal. Basically, the company is established to lend a hand to government in eradicating poverty and uplifting the life of the people through the micro finance services.

The company provides retail micro finance service to the economically and socially disadvantaged and deprived people. Its mission is to reach out and encourage poor people of the central and Eastern Regions through microfinance services including special support package (Solar Home System, Biogas and Irrigation, etc.) and making them financially empowered.

The Bank has been registered with authorized capital of NPR 40 million and currently holds issued capital of NPR 20 million and paid up capital of NPR 14 million. The Bank is firmly motivated to support the national movement of poverty reduction through preparing the community which actively participates in national product.


NO presence of major shareholders in Naya Nepal Laghubitta Bikas Bank Limited as per the Prospects.



Board of Directors of in Naya Nepal Laghubitta Bikas Bank Limited

Dr. Purushottam Shrestha,  Chairman
Qualification: Doctor of Philosophy (Ph.D in Microfinance)
Work Experience: Worked for 2 years as General Manager in Sana Kisan Bikash Bank. In addition, he holds 30 years of work experience in Agriculture Development Bank limited during which he also served as acting Deputy General Manager.

Mr. Rajendra Kumar Mainali, Executive Director
Qualification:  Bachelors of Law (T.U)
Work Experience:  Worked for 30 years in the Agricultural Development Bank.

Mr. Dil Basnet, Member
Qualification: Bachelors of Science (B. Sc , Agriculture )
Work Experience: Worked for 30 years in Agriculture Development Bank as a branch manager.

Mrs. Prabha Shrestha, Member
Qualification: Graduate
Work Experience: Worked for 30 years in the Agricultural Development Bank.

Mrs. Dhana Khatiwada, Member
Qualification: Post Graduate
Work Experience: She has been working in the women's empowerment program from past 15 years.



Board of Directors (BOD) Representation as per Prospectus.

Management Team of in Naya Nepal Laghubitta Bikas Bank Limited

Mr. Rajendra Kumar Mainali, Chief Executive Officer
Qualification: Bachelors of Science (B.Sc., Agriculture), Bachelors of Law (LLB)

Mr. Dilendra Basnet, Act. Ast. Manager
Qualification: Master of Arts (Economics)

Mr. Kamal Bahadur Khatri, Act. Ast. Manager
Qualification: B.B.S (T.U)



Capital Structure

FINANCIAL HIGHLIGHT OF THE BANK

                                                                  Figure in Rs “000”

The micro finance current paid up capital stands at 70% of its issued capital. From the date of establishment, this institution’s capital has not been altered. This will be the first in the company’s history to increment its capital.

With the initial public offering (IPO), the company plans to par the capital structure with that of issuing capital. Further in the future, till 2072/73, it has not projected any increase in its capital from Rs 20 million. Similarly, observing reserve and surplus of the company, it is in a growing phase than that of the past figures.

As the micro finance is newly established one, we can observe in the initial two years the company reserve was in loss, however, coming to this FY 2069/70, the bank has come to maintain NPR 2,437 thousand in reserve. If we closely observe and compare the data of reserve and surplus, the micro finance has maintained steady improvement, indicating increasing progress in the income flow of the bank than that of the past.

The company loan base is mainly focused on the retail lending and  micro finance services including special support packages like Solar Home System, Biogas and Irrigation, etc. to the economically and socially disadvantaged and deprived people of central and Eastern Regions.

As the company is 10 regional ‘D’ category bank, its market reach is currently limited to the areas of Kavrepalanchok, Ramechhap, Sindhuli, Mahottari, Dhanusha, Siraha, Saptari, Sunsari, Morang and Jhapa.

Looking at the growth figure of the loan, in the FY 2067/68 it made an astounding growth, but coming to the following fiscal year, its growth has been at the lower rate.

Considering the  low penetration of MFI (Micro finance Institutions) and financial situation of maximum people residing in the above mentioned areas ,  the opportunity for the company to expand its loan portfolio is immense, however,  the loan figures of the company suggest either it is cautioned or isn’t able to tap into the opportunity.

Moreover, the growth in borrowings is higher than that of loan which suggests the bank has a large chuck of idle amount. Looking at the financial statement of the company, it has used such money mainly in Money at call and short Notice, which tends to provide a lower return comparatively for loans.

However, as the main source of funding for the company’s lending purpose comes in the form of deprived sector loans from the commercial banks which tend to be at the lower rate. So, the bank seems not too much reluctant about the cost of fund and proper utilization of the fund.

Currently, the borrowing amount of the company stands at Rs 116.34 million and money at call and short notice stands at Rs 78.28 million.

As, it is a micro finance company; it doesn’t have the provision to accept saving like other financial institutions, however, the company can get approval from the NRB to accept micro deposits of allocated groups which will be small in size. Currently, it holds around Rs 30.92 million in deposit.

Looking at the past three years report, the bank’s operating profit before provision is in the increasing phase, however, the growth rate is in descending phase. Because of the bank’s lack of expansion in its loan portfolio, its growth in the interest income is declining.

The past three years data reveal the growth in interest income dropped from 180.85 percent to 79.63 percent to 7.45 percent. Though, the interest expenses have also decreased from 327 percent to 86.01 percent to -6.26 percent, it seems not adequate to maintain constant net interest income growth figure, which has also tumbled from 95.36 percent to 26.43 percent.
 
Apart from the dropping net interest income, the increasing provision amount, year after year, has also not ease the company in sustaining constant or increasing growth. Till date, the bank has sustained a negative write back in all its prior fiscal year. In all the subsequent years mentioned above, it suggests an increasing pattern of bad loans as its net writes back to loan figure currently stands at 5.89 percent from the 1.32 percent. The increasing net provision amount and its failure to write back the prior bad loans, indicates a very much worrying sign for the bank.
 
Now, if we look at the net profit figure, we will find that it is also in the declining trend though it is on the positive side. Given the lack of loan expansion, declining interest income along with the increasing bad debts, have underpinned in the company’s diluting performance.

If we look at the Net Worth of the company, it has grown to Rs 117.41 by the end of the last fiscal year.  
Now, looking at the EPS, ROA and ROE, we can observe that its financial indicators have taken a dive in the FY 69/70 compared to the previous fiscal year. Though, the company’s financial indicator suggests company’s financial performance as not so bad, the inconsistence in its performance is a worrying sign which needs to be taken into consider before investing.

In conclusion, the bank is not well established micro finance institutions like Sana Kisan Bikash Bank or Rural Micro Development Center Ltd. and its financial health condition is not one of the best. The lack of expansion of loan, its declining growth, increasing provision amount and its failure to make a write back should be considered while investing in this IPO.

However, the interest of investors towards the micro finance companies along with the size of floatation being small and the presence of excess liquidity in the market gives a high change for this IPO, being oversubscribed and well received in the market.



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