Finance Companies and their paid-up capital status; Will they meet the minimum requirement on time?

Thu, Apr 12, 2018 6:19 AM on Exclusive, Latest, Stock Market,
Finance Co...
  • Ruchi Rayamajhi

As of Poush 2074, there are total 24 Finance Companies in Nepal. Among them, 21 are of national level and 3 are with a working area of 1-3 districts out of which 1 company is operating in a single district. However, there are no finance companies with a working area of 4-10 districts.

According to the Monetary Policy 2072/73 unveiled by NRB, the minimum paid-up capital requirement for national level finance companies is Rs 80 crores. Similarly, 4-10 district level finance companies are required to hike their capital to Rs 80 crores and 1-3 district level finance companies need to hike their capital to Rs 40 crore and by the end of FY 2074. Earlier the minimum paid up requirement for national level, 4-10 district level and 1-3 district level finance companies was Rs 30 crore, Rs 30 crore and Rs 10-30 crore, respectively.

As per the latest second quarterly report of Fiscal Year 2074/75, only 6 national level finance companies have been able to maintain their capital above Rs 80 crore (however, 1 of these companies has been declared as a crisis-ridden financial institution). And only 2 finance companies with a working area of 1-3 districts have been able to maintain the minimum required capital. However, Nepal Rastra Bank (NRB) has extended deadline for Class ‘B’ and ‘C’ financial institutions operating in a single district to meet the requirement of minimum paid-up capital within Poush, 2076. Hence, Multipurpose Finance Co. Ltd. (MPFL), the only finance company operating in a single district i.e. Saptari, can extend its minimum paid up capital up to Rs 40 crore within Poush, 2076.

MINIMUM CAPITAL REQUIREMENT OF FINANCE COMPANIES

Category

Earlier

By the end of FY 2073/74

Changes required to be made

Finance Companies

(National Level)

Rs 30 crore

Rs 80 crores

166.67%

Finance Companies

 (4-10 districts)

Rs 30 crore

Rs 80 crores

166.67%

Finance Companies

 (1-3 districts)

Rs 10-30 crore

Rs 40 crore

33.33-300%

Capital Merchant Banking & Finance Co. Ltd (CMB) has the highest paid-up capital of Rs 93.50 crore out of all the national level finance companies. However, it has been declared as a problematic institution.It has already met the minimum requirement of paid-up capital.

Hence, from among the non-problematic finance companies, ICFC Finance Limited stands out with the highest paid-up capital of Rs. 88.22 crore. It has also already met the minimum requirement of capital set by Nepal Rastra Bank.

Likewise, Janaki Finance Company Limited (JFL) has the highest paid up capital of Rs 40.33 crore out of all 1-3 district level finance companies. It has also met the requirement of paid up capital of Rs 40 crore, set by the monetary policy of 2015/16.

Given below is the list of finance companies in Nepal along with their working areas and paid-up capital as per the latest quarterly report (i.e. Q2 Report of FY 2074/75):

List of Banks and Financial Institutions

 Class: “C” (Finance Companies)                                              (Rs in crores)

S.No.

Symbol

Name

Head Office

Paid up Capital

NATIONAL LEVEL FINANCE COMPANIES

1.        

NFS

Nepal Finance Ltd*

Kamaladi, Kathmandu

13.58

2.        

NSM

Nepal Share Markets and Finance Ltd.*

Ramshahapath, Kathmandu

N/A

3.        

GFCL

Goodwill Finance Ltd.

Hattisar, Kathmandu

80.00

4.        

LFC

Lalitpur Finance Co. Ltd.*

Lagankhel, Lalitpur

18.79

5.        

UFL

United Finance Co. Ltd.

Durbarmarg, Kathmandu

80.05

6.        

BFC

Best Finance Co. Ltd.*

Chabahil, Kathmandu

28.67

7.        

PROFL

Progressive Finance Co. Ltd.

Newroad, Kathmandu

21.00

8.        

PFL

Pokhara Finance Ltd.

Pokhara, Kaski

65.57

9.        

HATH

Hathway Finance Ltd.

Dharan, Sunsari

30.00

10.    

WMBF

World Merchant Banking & Finance Ltd.*

Hetauda, Makawanpur

18.19

11.    

CMB

Capital Merchant Banking & Finance Co. Ltd.*

Battisputali, Kathmandu

93.50

12.    

CFL

Crystal Finance Ltd.*

Thapathali, Kathmandu

7.00

13.    

GMFIL

Guheshwori Merchant Banking & Finance Ltd.

Pulchowk, Kathmandu

80.00

14.    

ICFC

ICFC Finance Ltd.

Bhatbhateni, Kathmandu

88.22

15.    

CEFL

City Express Finance Ltd.

Kamalpokhari, Kathmandu

28.02

16.    

MFIL

Manjushree Financial Institution Ltd.

Nayabaneshwor, Kathmandu

72.43

17.    

JEFL

Jebils Finance Ltd.

Newroad, Kathmandu

56.95

18.    

RLFL

Reliance Finance Ltd.

Pradarsani Marg, Kathmandu

51.25

19.    

GUFL

Gurkhas Finance Ltd.

Dillibazar, Kathmandu

86.79

20.    

SIFC

Shree Investment & Finance Co. Ltd.

Dillibazar, Kathmandu

34.55

21.    

CFCL

Central Finance Ltd.

Kupondole, Lalitpur

52.06

1-3 DISTRICT LEVEL FINANCE COMPANIES

S.No.

Symbol

Name

Head Office

Paid up Capital

Working Areas

 

1.        

JFL

Janaki Finance Co. Ltd.

Janakpurdham, Dhanusa

40.33

Dhanusa, Mahottari, Siraha

2.        

MPFL

Multipurpose Finance Co. Ltd.

Rajbiraj, Saptari

4.14

Saptari

3.        

SFFIL

Shrijana Finance Ltd.

Biratnagar, Morang

40.06

Morang, Sunsari, Saptari

*Nepal Finance Ltd, Nepal Share Markets and Finance Ltd., Capital Merchant Banking & Finance Co. Ltd. and Crystal Finance Ltd. have been declared as crisis-ridden institutions. So, the latest paid-up capital of these companies is not available.

* Lalitpur Finance Co. Ltd. and World Merchant Banking & Finance Ltd, have been recently declared as non-problematic institution. So, their latest paid-up capital is not available.

*Best Finance Co. Ltd. is in the process of acquiring Synergy Finance Limited (SYFL).

 

Best Finance Limited (BFC) is in the process of acquiring Synergy Finance Limited (SYFL) in the share swap ratio of 1:1. The paid up capital of BFC as per the latest Q2 report is Rs 28.67 crore and that of SYFL is Rs 47.44 crore. SYFL will be issuing 25% (10:2.5) right share i.e. 11,86,022.47 units to its shareholders of worth Rs 11.86 crore. It has already been added in the SEBON pipeline. After issue of 25% right shares, it will reach to Rs 59.31 crore. Hence, the final paid up capital of BFC after acquiring SYFL will be Rs. 87.98 crore and hence, BFC will meet the minimum capital requirement set by Nepal Rastra Bank after completion of acquisition process with SYFL.

Similarly, Progressive Finance Limited (PROFL) has also been added in Securities Board of Nepal (SEBON) pipeline to request approval for the issuance of 1:2.81(281%) right shares. PROFL is seeking approval to issue 5,901,000 units shares to be floated a face value of Rs 100 per share. Its current paid up capital stands at Rs 21.00 crore and after 281% right issue, it will reach to Rs 80.10 crore. Hence, it will also meet the minimum capital requirement after the right share issue.

Likewise, 40% right shares of Jebils Finance Limited (JEFL) has also been added in the SEBON pipeline for approval to issue 23,11,650 units right shares worth Rs 23.11 crore to its shareholders. Recently, 100% right shares worth Rs. 28.89 crore of the finance company have been listed in NEPSE. The company has also proposed 3.57% bonus to its shareholders from the net profit of FY 2073/74. Its paid up capital will reach to Rs 83.80 crore after adjustment of 3.57% bonus shares, 40% and 100% right shares. Thus, it will also meet the minimum capital requirement after the adjustment of the bonus and the right shares.

A few of the finance companies that have not met the minimum capital requirement have taken a first step towards increment in the paid up capital by issuing right shares. Pokhara Finance Limited (PFL) had recently issued 15% right shares worth Rs 9.83 crore to its shareholders. After 15% right share issuance and already proposed 8.26% bonus share, its paid up capital will reach Rs 81.63 crore hence, meeting the minimum capital requirement.

Similarly, Manjushree Finance Limited (MFIL) has recently issued 5% right shares worth Rs 3.62 crore to its shareholders. Also, it had announced 6% bonus shares from the net profit it had earned in the FY 2073/74. Thus, after adjustment of bonus and right shares, its paid up capital will surge to Rs 80.40 crore. Hence, it will meet the minimum capital requirement.

Likewise, Reliance Finance Limited (RLFL) had issued 45% right shares worth Rs 23.06 crore. After issuance of 45% right share, its paid up capital will reach Rs 74.32 crore. As per NRB’s directive for all national level finance companies to increase their paid up capital to a minimum of Rs 80 crore, RLFL should increase a further capital hike of Rs 5.68 crore (around 7.65%).

Also, Central Finance Company Limited (CFCL) has announced 8.5% bonus shares from the net profit of FY 2073/74 to its shareholders. Central Finance has also recently commenced its 50% right share issue. After the adjustment of right shares, its paid up capital will reach Rs 78.09 crore. And the after the bonus shares worth Rs 6.63 crore, its paid up capital will stand at Rs 84.72 crore. Hence, it will soon meet the minimum capital requirement.

Shree Investment & Finance Company Limited (SIFC) had also issued 83% right shares worth Rs 28.67 crore. It’s paid up capital stand at Rs 34.54 crore. After adjustment 83% right share, its paid up capital reached to Rs 63.20 crore, As per NRB’s requirement for all finance company to increase their paid up capital to a minimum of Rs 80 crore by the end of FY 2073/74, SIFC will need to issue a further capital hike of Rs 16.8 crore (around 26.5%).

Hathway Finance Company Limited (HATH) (former Arun Finance Limited) has announced 180% right shares. Its current paid up capital remains at Rs 30 crore. After adjustment 180% right share, its paid up capital will reach Rs 84 crore from existing Rs 30 crore.

Lalitpur Finance Company Limited (LFC), World Merchant Banking & Finance Limited (WMBF) and City Express Finance Limited (CEFL) (former Kuber Merchant Finance Limited) have recently been released from problematic institutions. As per NRB Directives, problematic institutions can meet the new minimum regulatory paid-up capital requirement within two years of getting rid of the ‘problematic’ status.

Hence, hopefully all the finance companies will meet the minimum capital requirement in near future.