Care Rating assigns “IPO Grade 4” rating to the IPO of Sun Nepal Life Insurance; Company to issue 60 lakh unit shares

Care Rating Nepal Limited has assigned grading of ‘CARE-NP IPO Grade 4’ to the proposed Initial Public Offer (IPO) of Sun Nepal Life Insurance Company Limited (SNLIC).

‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals. CRNL assigns IPO grades on a scale of Grade 1 to Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. CRNL’s IPO grading is an opinion on the fundamentals of the issuer.

The grade assigned to any individual issue represents a relative assessment of the ‘fundamentals’ of the issuer. SNLIC proposes to issue 60 lakh unit shares of face value of Rs.100 each at par aggregating Rs. 60 crore.

The grading assigned to Sun Nepal Life Insurance Company Limited (SNLIC) is constrained by short track record of operations leading to small scale of operation; concentration in Endowment policies, competition from other insurance companies and relatively small market share in the life insurance industry during FY18 (UA, refers to financial year ended on July 16, 2018).

The grading, however, derives strength from promoter support, experienced board and management team, adequate geographical coverage through branches, moderate level of Premium and Profit during first year of operation in FY18 (Unaudited), comfortable combined ratio, good asset quality of investment book and increase in investment income. Continued promoter support, ability to remain profitable while achieving business growth and maintain adequate solvency position would be the key grading sensitivities.

Sun Nepal Life Insurance Company Limited (SNLIC) is a life insurance company, which obtained license from Insurance Board of Nepal on August 2, 2017. The company has been offering an extensive range of products as Money Back, Endowment, Whole Life, Term Assurance products etc. through its diversified sales network. SNLIC had an asset base of Rs. 1650 Mn as on July 15, 2018. The capital structure of the company comprises of an authorized capital of Rs. 2 Bn out of which Rs. 1.40 Bn is paid up capital from the promoter group and the remaining is proposed to be issued to the public through IPO.