Rajan Kumar Amatya is Deputy General Manager of Nepal Investment Bank Ltd (NIBL). ShareSansar team sat with Mr. Amatya to discuss about the Further Public Offering (FPO ) worth Rs.5.45 arba, 90.69 lakhs unit of NIBL being offered from tomorrow at the rate of Rs 601/unit.
- Why should investors invest in the FPO of NIBL?
NIBL has been in operation for the past 30 years in Nepal. We will reach paid up capital of Rs 7.25 arba, Core capital of Rs 16 arba and reserve of Rs 9.11 arba after this FPO . Our fundamentals are strong with consistent growth every year. We have been giving return to the investor on an average of 37.94% and the current price of our share in the secondary market is well above Rs 601/unit. Thus, this FPO would be a lucrative deal for investors for both long and short term investment.
- The reserve is set to double immediately after FPO. Why isn't there any projection of future dividend in the offer letter of FPO?
The SEBON bars companies from forecasting the dividends in offer letter of FPO/IPO. However, we are committed to providing consistent return to the shareholder every year. At current, our EPS stands at Rs 34.4. So, a good return next year should not be an issue.
- How much can shareholders expect from the profit of current fiscal year as the paid up capital and reserve will reach Rs 7.25 arba & Rs 9.11 arba respectively after FPO?
It is too early to speculate the dividend as many factors will affect the proposed dividends. Furthermore, it is the BoD to propose dividends for any given fiscal year.
We will not be limited by paid up capital of Rs 8 arba. If the business demands we will definitely go beyond that. Our paid up capital was Rs 2 arba when the minimum paid up capital set by the Nepal Rastra Bank (NRB) was just Rs 50 crore. When NRB required paid up capital to be minimum of Rs 2 arba, our bank reached the paid up capital of Rs 5 arba. So, the minimum requirement for paid up capital set by the NRB will merely serve as guideline for our growth.
- The offer letter of FPO projects paid up capital of Rs 7.25 arba in the FY 2076/77. Why is there such discrepancy?
It is just a technical issue rather than real one. As dividends have not been appropriated in the projection, the paid up capital has remained the same. However, depending on the need we will be giving stock dividends which will in turn increase the paid up capital.
- Is NIBL in the process to acquire Ace Development Bank?
Our AGM has delegated authority to BoD to initiate Merger and Acquisition process suitable bank and financial institution. However, I would not be able to comment on individual cases as it is against the law and may affect the secondary market.
- At the beginning 5% of the shares being offered in FPO were set aside for employees of NIBL. However, it has been removed from the offer Letter. Why is it so?
SEBON directed us to remove the shares set aside for the employees of our bank. The law does not provide any reservation of shares for employees during FPO. Such reservations are only for IPO.
- Is Demat account necessary to apply for FPO ?
No. Demat account number is an optional information to be provided by the investors. The allotted shares will be deposited directly to the demat account if investors provide their demat account number. The investors who do not provide demant account number will receive their share in paper form.
- What would be the timeline of the allotment of shares of FPO ?
The allotment of shares will depend on the number of applications we receive for the FPO. We have planned to conclude allotment by 45 days after the issue closes. It is more likely that the investors will get their refund by the end of Chaitra.
- The rating agency, ICRA Nepal, pointed out that top 20 depositor of your bank hold 35% of the total deposit and top 20 borrowers' account of 32% of the loan disbursed. Isn't this a concern for investors?
Our bank is the first choice for the high net worth individual and organizations among other diverse customer base of the bank. These individuals and organizations have high deposits as well as higher credit demand. This shows that the customers have higher trust and confidence on banking services we provide. Furthermore, we are also working to diverse loan and deposit portfolio of the bank as suggested by the ICRA Nepal.
- In your FPO offer letter, Return on Equity (ROE) has been projected to decline to 12.54% in FY 2074/75 from 20% in the Last Fiscal Year. How is bank going to address this issue?
I think it is not fair just to look at ROE while analyzing a company. Our bank has been consistently providing higher stock dividend every year which will decrease the ROE as number of shares increases. If we were to look at the other indicators such as Net Worth, EPS, Quarterly results, NPL etc, investors will find steady growth and strengthened fundamentals of NIBL.
- In Nepal the price of promoters shares is almost always lower than that of ordinary shares. Even in case of NIBL the price promoters share is trailing behind the ordinary share. Why is this so?
Not everybody can be promoter of BFIs. There are stringent regulatory requirement from the NRB when an investors tries to acquire promoter shares above certain threshold. The promoter should pass fit and proper test among many other litany of requirements. Unlike promoter shares of NIBL, promoter shares of other listed companies may not be easily tradable in the secondary market. So, investors in Nepal are not interested in promoter share which is clearly reflected in the difference between promoters and ordinary share price of a listed company.