Care Rating Nepal assigns CARE-NP IPO Grade 4 to proposed 50% Rights Share Issue of Mahuli Samudayik Laghubitta Bittiya Sanstha

Care Rating Nepal Ltd has assigned grading of CARE-NP IPO Grade 4 to the proposed Rights Share Issue of Mahuli Samudayik Laghubitta Bittiya Sanstha Limited (MSLB). 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.

MSLB proposes a 50% rights share issue of 3 lakh equity shares of face value of Rs. 100 each at par aggregating Rs. 3 crore.

The grading is constrained by limited track record of operations, volatile net profit over the period, increasing non-performing loans (NPLs), portfolio concentration towards wholesale and trade business, moderate dependence of resource profile on banks and financial institution borrowings, exposure to the regulatory risks related to the microfinance industry and the inherent risk involved in microfinance lending.

However, the grading draws strength from the considerable growth in loan & advance and total income & profit over the period, healthy capital adequacy ratio (CAR), adequate geographic diversification and comfortable liquidity profile.

Ability of the company to scale up the operations while maintaining the capital adequacy levels, asset quality, geographical diversification and ability of the company to manage the impact of any regulatory changes by NRB would be the key rating sensitivities.