Proposed 200% right shares issue of Samata Laghubitta receive Grade 4 rating; more than 12 Lakh units of shares offered

CRNL has assigned grading of “CARE-NP IPO Grade 4” to the proposed Right Share Issue of Samata Laghubitta Bittiya Sanstha Limited (SLBSL). “CARE-NP IPO Grade 4” indicates Below Average Fundamentals.

SLBSL propose 200% right share issue of 12.1344 lakh number of equity shares of face value of Rs.100 each at par aggregating Rs.121.344 million.

The grading assigned to the right share issue of SLBSL is constrained by low market share in terms of credit portfolio and deposit and concentrated credit portfolio. The grading also constrained by its significant increase in Non-Performing Loan (NPLs) to total loan in H1FY19, high dependence of resource profile on Banks & Financial Institutions (BFIs) borrowing and deteriorated financial performance in FY18 over FY17, however improved during H1FY19. Competition from other Micro Finance Institutions (MFIs) and Co-operatives, inherent risk involved in the microfinance industry including competition and unsecured lending and exposure to regulatory risks related to microfinance industry also remain a concern.

The grading, however, derives strength from experienced board members and management team, ability to geographically diversify business over moderate period of operation and moderate Capital Adequacy ratio (CAR). The grading is further supported by considerable growth in business over the period and comfortable liquidity profile.