"12% Goodwill Finance Limited Debenture 2083" opens from today; Read following information before applying

Company profile

Incorporated in September 1994, Goodwill Finance Limited (GFCL) started its commercial operation from May 1995. The company is now operating as National level finance company. The company is promoted by diversified range of promoters involved in different professions. Share capital of the company is distributed among promoter & public in the ratio of 51:49. The company’s equity share is listed in Nepal stock exchange. It’s corporate office is located at Hattisar, Kathmandu, Nepal. Mr. Saroj Kaji Tuladhar is the Chief Executive Officer of the company.

GFCL has presence in 13 districts of Nepal through its 16 branches and two ATMs as of mid-July 2019. GFCL has market share of about 9.07% of deposits and 8.59% in terms of credit portfolio of Nepalese Finance Companies industry as on mid-July 2019. GFCL has reported a net profit of ~NPR 152 million (~133% YoY growth) during 2018-19 over an asset base of NPR 8,718 million as of mid-July 2019. GFCL’s CRAR was 13.77% and Gross NPLs were 1.23% as on mid-July 2019. In terms of technology platform, GFCL uses “FinMAN” software across all its branches.

Objective

About the issue

Goodwill Finance Limited (GFCL) is issuing a total of 2.5 Lakh units of debentures at par value of Rs.1000 per unit. The issue will open from Falgun 28, 2076 to Chaitra 2, 2076. In case of under subscription, the issue will be extended till Chaitra 12, 2076.

The total value of "12% Goodwill Finance Limited Debenture 2083" is Rs.25 Crore and will provide 12% interest semiannually. The debentures will mature in 7 years i.e. 2083. Out of the total units, 100,000 units (40% of the issue) is for the general public while 150,000 units (60% of the issue) will be privately placed. Similarly, 5% of debenture issued for the general public i.e 5,000 units is reserved for Mutual Funds.

NIBL Ace Capital Limited has been appointed as the issue manager.

Interested applicants can apply for a minimum of 25 units or a maximum of 5,000 units.

Capital structure

Shareholding structure

Primary shareholders

Board of Directors

Management Team

*There are 117 employees in total.

Rating

ICRA Nepal has assigned the issuer rating of [ICRANP-IR] BB (pronounced ICRA NP issuer rating double B) assigned to Goodwill Finance Limited (GFCL). The sign of + (plus) or – (minus) appended to the rating symbols indicate their relative position within the rating categories concerned. Issuers with this rating are considered to have moderate risk of default regarding timely servicing of financial obligation. The rating is only an opinion on the general creditworthiness of the rated entity and is not specific to any particular debt instrument. 

ICRA Nepal has also reaffirmed the rating of [ICRANP] LBB for GFCL’s subordinated debenture programme. Instruments with this Rating are considered to have moderate risk of default regarding timely servicing of financial obligations.

Strengths

• Adequate track record in banking operations (since 1995) with experienced senior management.
• Improving profitability profile with increased NIMs during FY2019 also remains positive for the assigned ratings.
• Relatively moderate deposit concentration risk (~14% in top 20 depositors as of jul-2019).
• Healthy capitalization (CRAR of 13.77% as of mid-Jul-2019) and adequate network along with its plans to expand over new geographies are expected to provide adequate growth opportunities, going forward.

Weaknesses

• Deterioration in deposit profile (declining share of current and savings accounts and increased cost of deposits) impacting the company’s competitive position.
• Subdued assets quality and underwriting norms though reported assets quality improving over the years (0+ dpd reached to ~13% in mid-July-2019).
• Aggressive credit growth in the last three fiscals at ~27% compared to ~20% growth in the banking industry amid evolving internal control, system and processes at the company with need of better monitoring of the portfolio.
• Scope for improvement in MIS, high credit concentration (~30% among top 20 borrowers) also remains a rating concern.
• Lack of strong institutional promoters and its modest scalability also remain rating concerns.

Going forward, GFCL’s ability to maintain assets quality and attaining requisite growth with adequately diversified portfolio towards various sectors/geographies would remain key challenges.

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

Financial indicators

Market share

Source: Company Prospectus and ICRA Nepal rating report