The finance industry and the individual companies: ICFC and Janaki Finance leading in the industry. Industry average profit at Rs 6.11 crores

The outreach of banking and financial services in Nepal is still lagging behind. Majority of the population are still restrained from the access of these services. Finance companies are therefore licensed by the central bank with an objective to provide different banking and financial services to the general public. NEPSE currently has 20 listed companies so far.

Synergy finance has been acquired by Best Finance Limited and have started joint transaction. However, the companies have published the fourth quarter report separately. So post SYFL acquisition, the total listed has been limited to 20 companies from 21. If problematic institutions such as Nepal Finance, Nepal Share Markets and Finance Limited, Capital Merchant Banking and Finance, Crystal Finance will come into operation, the number will increase.

The green box denotes national level finance companies while the orange box indicates finance companies operating in 1 to 3 districts. Thus, to facilitate the enthusiasts in the secondary market, the article has been prepared accumulating the analysis of all the finance companies which respect to their performance in 4^th quarter reports that can be useful for investment purpose. The industry average includes all the 21 finance companies. However, the performance of three companies operating in 1 to 3 districts have not been compared with the industry average.

Financial overview:

 Paid up capital:

Among the national level finance companies, ICFC Finance Company (ICFC) has the highest paid up capital (Rs 88.22 crores), followed by Gurkhas Finance Limited (GUFL) (Rs 86.80 crore). The top positions of the finance companies is in consistent with the third quarter report of FY 2074/75. However, this quarter, Pokhara Finance Limited (PFL) is third in terms of paid up capital with Rs 81.65 crores.

Among the finance companies operating in 1 to 3 districts, Janaki Finance Limited (JFL) has the highest paid up capital of Rs 40.34 crores It is further followed by Srijana Finance Company (SFFIL) with a paid up 40.07 crores. Finally, Multipurpose Finance Company (MPFL) is seen in the third position with Rs 4.15 crore.

The national level finance companies are required to meet the paid up capital of Rs 80 crores while the finance companies operating in 1 to 3 districts are required to meet the paid up capital of Rs 40 crores. The problematic finance companies which have started their operation will have to meet the paid-up capital requirement by mid-July 2019. Those are HATH, BFC, CEFL, LFC, WMBF among the 21 companies mentioned above in the table. There are other problematic companies as well but are yet to come into operation.

Find the descending of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of paid up capital:

Reserve and surplus:

In context of reserves and surplus, Pokhara Finance Limited (PFL) has highest reserve of Rs 35.75 crores, followed by Gurkhas Finance Limited (GUFL) with a reserve of Rs 33.37 crores. In the third place stands ICFC Finance Limited (ICFC) with reserve worth Rs 28.31 crores. The industry average reserve is around Rs 9.72 crores and 10 companies are above the average.

Among finance companies having their presence in 1 to 3 districts, Janaki Finance Limited (JFL) has a reserve worth Rs 28.05 crores, Srijana Finance (SFFIL) with reserve of Rs 20.08 crores and Multipurpose Finance Company (MPFL) with a reserve of Rs 2.13 crores.

Find the descending of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of reserves and surplus:

 Net profit:

Among the finance companies, the fourth quarter report shows that ICFC Finance (ICFC) has earned the highest net profit of Rs 9.85 crores. It is further followed by Manjushree Finance Company (MFIL) with net profit of Rs 9.70 crores. Shree Investment Finance Limited (SIFC), is in the third position with net profit of Rs 9.21 crores. The industry average net profit of finance companies stands at Rs 6.11 crores with 8 companies above industry average.

Among the 1 to 3 districts finance companies, Janaki Finance Limited (JFL) has a net profit of Rs 13.39 crores.  Srijana Finance Company (SFFIL) has a net profit of Rs 12.22 crores and and Multipurpose Finance Company with a net profit of 0.65 crores.

Find the descending order of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of net profit:

 Deposit collection:

The national level finance companies have been trying their best to attract the deposit clients. As of the fourth quarter of FY 2074/75, ICFC Finance (ICFC) has established itself in the top list in deposit collection. It has a deposit worth Rs 887.86 crores. Similarly, the company is followed by Manjushree Finance Limited (MFIL) and United Finance (UFL) with the collected deposit of Rs 607.40 crore and Rs 599.47 crore respectively. The industry average of deposit lies at Rs 2.95 arba with 11 companies standing above the par.

Among the finance company operating in 1 to 3 districts, Srijana Finance (SFFIL) has a deposit of Rs 540.93 crores, Janaki Finance (JFL) has deposits of Rs 165.16 crores and Multipurpose Finance (MPFL) has deposits of Rs 18.97crores.

Find the descending of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of deposit collection:

Loans and advances:

As shown by the figures, the positions in loans and advances are almost similar to deposit. The top three positions are occupied by ICFC Finance (ICFC), United Finance Limited (UFL) and Manjushree Finance Limited (MFIL) with credit disbursement worth Rs 698.68 crores, 522.20 crores and Rs 518.90 crores. The industry average stands at Rs 2.50 arba with 9 companies that have disbursed credit above the industry average.

Find the descending of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of loans and advances:

 Annualized EPS

With an industry average of Rs 13.27 in terms of EPS, only four finance companies have been able to deliver an EPS that is above industry average.

The finance company that has won the race of annualized EPS is Lalitpur Finance Company (LFC). The company’s annualized EPS stands at Rs 32.70. However, LFC’s reserves and surplus is negative. World Merchant Banking & Finance Limited (WMBF) has the second highest EPS that accounts to Rs 22.85. Net worth and reserves of WMBF are negative. Finally, Hathway Finance Company Limited (HATH) has an EPS of Rs 18.89 per share. It also has a negative reserve and surplus.

Among the finance companies operating in 1 to 3 districts, Janaki Finance has the highest EPS of Rs 33.19 followed by Srijana Finance (SFFIL) with an EPS of Rs 30.49. In the third position, we have Multipurpose Finance Company (MPFL) with an EPS of 15.61.

Find the descending of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of EPS:

 Net worth:

The industry net worth average of Rs 106.79 of the finance companies, 11 companies have net worth above average. Analyzing the net worth per share, Pokhara Finance Limited (PFL) has the highest net worth of Rs 143.79 followed by Gurkhas Finance Limited (GUFL) with net worth Rs 138.44. In the third place, we have ICFC Finance Limited (ICFC) with net worth per share of Rs 132.09.

Among finance companies operating in 1 to 3 districts, Janaki Finance Limited (JFL) has a net worth of Rs 169.53, Multipurpose Finance Limited (MPFL) has a net worth of Rs 151.25 and Srijana Finance (SFFIL) has the net worth per share of Rs 150.12.

Find the descending of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of net worth:

P/E Ratio:

As per the general rule of thumb in finance, lower the P/E ratio, better the company. Considering it, the finance companies with the least P/E ratio are World Merchant Banking & Finance Limited (WMBF) with P/E ratio of 4.16 times. Lalitpur Finance Company (LFC) with P/E ratio of 4.62 times and Hathway Finance Company (HATH) with P/E ratio of 6.62 times.  (Please note that all three companies have a negative reserve and net worth.)

Janaki Finance (JFL) has a P/E ratio of 5.66 times, Shrijana Finance (SFFIL) has a P/E ratio of 9.44 times, and Multipurpose Finance (MPFL) has a P/E ratio of 12.04 times.

Find the descending of both national level (green colored) and 1 to 3 districts level (orange colored) finance companies in terms of P/E ratio:

In a nutshell:

Given the study on these finance companies, what strengths and opportunities do you think they have in the highly dominated banking industry? Which finance company would you prefer investing in? Please write in the comment section below.

Disclaimer: The sources of provided information are quarterly reports, website and spokesperson. Any misinterpretation from the sources might be not adjusted in the analysis.