"10.25% SBL Debenture 2083" open for application from Bhadra 05 to Bhadra 19, 2076; All things you need to know before investing

Company profile

SBL Bank Limited (SBL), the 18th Class A Commercial Bank to be licensed by the NRB, commenced operations in December 2002. The bank’s paid up capital stands at Rs 8.88 arba with Rs 6.20 arba as its reserve and surplus.

The bank is headquartered at Hattisar 01, Kathmandu. Currently it has 163 branches spread across the country along with 4 extension counters, 100 branchless banking units, 162 ATMs and more than 1300 POS Machines.

Siddhartha Capital is a subsidiary of Siddhartha Bank. SBL has 51% stakes in the capital. According to the NRB Reporting and Analytics System the market share of SBL on deposits and loans & advances is 3.57% and 3.70% as on Chaitra 30, 2075.

Objective

About the issue

The issue is open from 5^th Bhadra, 2076. The early closing date of the issue was on 9^th Bhadra, 2076. Since it was not fully subscribed till the early closing, it has been extended up to 19th Bhadra, 2076.

Siddhartha Bank Limited (SBL) is looking to raise a debt worth Rs.2.50 Arba through issue of 2.50 Million units of debentures at par value of Rs.1000 each. Out of the total issue 1,000,000 units (40% of the issue) are for the general public while remaining 1,500,000 units (60% of the issue) will be privately placed.

The debentures will be providing 10.25% interest p.a. These debentures will mature after a period of 7 years. Interested applicants can apply for minimum 25 units and maximum 10 Lakh units.

NMB Capital Limited has been appointed as the issue manager for the debenture issue.

ICRA Nepal Limited has assigned [ICRANP] LA- Rating to the Rs.2.50 Arba Subordinated Debenture Programme (10.25% SBL Debenture 2083) of Siddhartha Bank Limited. Instruments with this rating are considered to have adequate degree of safety regarding timely servicing of financial obligation. Such instruments carry low credit risk.

Capital structure

Shareholding structure

Primary shareholders

Board of Directors

Management Team

*There are 1,581 employees in total.

Rating

ICRA Nepal has assigned a rating of [ICRANP] LA- (pronounced ICRA NP long-term debt rating A minus) to the proposed subordinated debenture program worth NPR 2,500 million of Siddhartha Bank Limited (SBL). Instruments with this rating are considered to have an adequate degree of safety regarding the timely servicing of the financial obligations. Such instruments carry low credit risk.

ICRA Nepal has upgraded the outstanding issuer rating of SBL to [ICRANP-IR] A- (pronounced ICRA NP issuer rating A minus) from [ICRANP-IR] BBB+ (pronounced ICRA NP issuer rating triple B plus). Issuers with this rating are considered to have an adequate degree of safety regarding the timely servicing of the financial obligations. Such issuers carry low credit risk.

Strengths and opportunities

• Steady financial indicators including its good asset quality in recent years, notwithstanding the marginal deterioration in 9M FY2019.
• Increasing footprint across the country, which has helped the bank maintain good growth as well as geographical diversification and portfolio granularity.
• Although the bank’s high credit growth raises concerns about the incremental asset quality amid high interest rates and tight liquidity in the banking sector, the same is partly mitigated by the low concentration of credit among the top borrowers.
• Ability to withstand credit shocks and maintain its solvency profile remains adequate despite its moderate capitalization profile.
• Adequate track record (operating since 2002), promoters with sufficient financial sector experience, and the stable and experienced senior management team.
• Good profitability profile, supported by healthy net interest margins (NIMs) and adequate non-interest income levels.

 Weaknesses and threats

• Relatively inferior deposit profile vis-à-vis the commercial bank average. This stems from the bank’s higher reliance on institutional deposits over the years to fund its high credit growth.
• Low CASA proportion and resultant higher cost of deposits (7.69% in 9M FY2019, ~120 bps above the commercial bank average) could be a competitive disadvantage in the ‘base rate plus’ lending model practiced in the industry.
• Concentration of deposits among the top accounts remains on the higher side and stays a rating concern, especially in the backdrop of tight liquidity and increasing volatility in interest rates.
• Although SBL’s incremental CASA proportion and cost of funds are expected to benefit from the growth in its franchise network and concomitantly higher penetration among retail depositors, the bank’s ability to improve the deposit mix and cost remains to be seen.
• Moderate capitalization profile vis-à-vis its peers (CRAR of 12.37% and tier I capital of 9.71% vs. the regulatory minimum requirement of 11% and 8.5% under Basel III norms).

Source: https://icranepal.com/releases.php

Financial indicators

Source: Company Prospectus and ICRA Nepal rating report