10% Nabil Debenture 2082 open for application; Find out necessary information before investing

Company profile

Nabil Bank Limited, the first private-sector class A commercial bank in Nepal, started commercial operations in July 1984 as Nepal Arab Bank Limited. Nabil started off as a joint venture with Emirates Bank International. The latter divested its stake in Nabil which was ultimately taken over by NB International, an Ireland based special purpose vehicle associated with CG Group. The name was changed to Nabil Bank, following the withdrawal of its joint venture partner -Emirates Bank International, in 1997. Headquartered in Kathmandu, Nabil is the second-largest private sector commercial bank, in terms of asset base and net worth as of mid-Jan 2019. 

The bank’s major promoters are NB International, Ireland (50%) and Rastriya Beema Sansthan (9.67%). Including NB International, the family members of the Chaudhary Group own a majority stake (~53%) in the bank. Mr. Anil Keshary Shah is the bank’s, Chief Executive Officer. Nabil’s equity shares are listed on the Nepal Stock Exchange with the second highest market capitalization (among banking sector stocks) as of mid-December 2018. 

Nabil has a presence throughout the country through 118 branches, two extension counters and 176 ATMs. Its market share was 5.62%, in terms of the deposit base, and 5.53% of its total advances were in the Nepalese commercial banking industry, as of mid-January 2019. Nabil reported a profit after tax (PAT) of ~NPR 3,981 million in 2018 on an asset base of NPR 160,978 million as of mid-July-2018. In H1 FY2019, Nabil reported PAT of ~NPR 2,176 million on an asset base of NPR 177,672 million. As of H1 FY2019, Nabil’s CRAR was 11.95% with CET 1 of 10.78% and gross NPAs of 0.61%. In terms of the technology platform, Nabil has implemented Finacle across all its branches.

Objective

About the issue

Nabil Bank is issuing "10% Nabil Debenture 2082" from today (Chaitra 2) to Chaitra 5, 2076. In the case of under-subscription, the issue will be extended to Chaitra 16, 2076.

The bank is issuing a total of 20 Lakh units of debentures at par value of Rs.1000 per unit. The total value of the issue is Rs.2 Arba and will be providing 10% interest rate. The debenture will mature in 6 years i.e. in 2082.

Out of the total issue, 8 Lakh units (40% of the issue) will be issued to the general public while the remaining 12 Lakh units (60% of the issue) will be privately placed.

Laxmi Capital Market Limited has been appointed as the issue manager.

The interested applicants can apply for a minimum of 25 units and no limit has been set for maximum units.

Offer Letter

Capital structure

Shareholding structure

Primary shareholders

Board of Directors

Management Team

*There are 1,079 employees in total.

Rating

ICRA Nepal has assigned [ICRANP] LAA- (pronounced ICRA NP L double A minus) to the proposed subordinated debenture programme of NPR 2,000 million of Nabil Bank Limited. The subordinated debenture rating of AA- is one notch lower than the rating of AA. Instruments with AA- rating are considered to have a high degree of safety regarding the timely servicing of financial obligations. Such instruments carry very low credit risk.

ICRA Nepal has also reaffirmed the rating of [ICRANP-IR] AA- (pronounced ICRA NP Issuer Rating Double A minus) to Nabil Bank Limited (Nabil). The entities with [ICRANP-IR] AA- rating are considered to have high degree of safety regarding timely servicing of financial obligations. Such issuers carry very low credit risk. The rating is only an opinion on the general creditworthiness of the rated entity and not specific to any particular debt instrument.

Strength

• Established track record (operating since 1984), strong competitive positioning in the industry and healthy performance indicators
• Ability to offer better lending rates, which, in turn, stems from one of the lowest cost of funds in the industry
• Incremental growth prospects (in the recently implemented base rate plus lending model) as well as its borrower profile and asset quality
• Good asset quality, adequate capitalization and strong solvency profile
• Expansion of its franchise network and incremental expansion plans are also likely to support the growth cum-diversification of Nabil’s business
• Bank’s steady and moderate credit growth over the last three to four years, despite its strong competitive positioning and high industry average growth rate during this period
• Financial strength of its major promoters, its seasoned management team and established underwriting norms and control processes.

Weakness

• Recent liquidity challenges faced by the Nepalese banking industry, including Nabil, because of higher growth in credit in the sector vis-à-vis deposits during the past four to five years.
• Nabil’s liquidity ratio has declined with a commensurate increase in the credit-to-deposit ratio.
• The higher credit-to-deposit ratio has helped Nabil offset the impact of the rising cost of funds, thereby stabilizing the net interest margin (NIM) and supporting profitability.
• A sharp decline in the bank’s proportion of current and savings account (CASA) deposits amid price wars between banks in the term deposits segment.

Source: https://www.icranepal.com/

Financial indicators

Market share

Source: Company Prospectus and ICRA Nepal rating report