Care Ratings assigns'Grade 4' rating to the upcoming IPO of Asha Laghubitta indicating below average fundamentals; Microfinance issuing 6 lakh unit shares

Care Ratings Nepal Limited assigned ‘CARE-NP IPO Grade 4’ rating to the proposed Initial Public Offering (IPO) of Asha Laghubitta Sanstha Limited (ALBSL) indicating below average fundamentals.

The microfinance company has proposed to issue 600,000 number of equity shares of face value of Rs.100 each at par.

The grading assigned to the Initial Public issue of ALBSL is constrained by short track record and small scale of operation, increasing percentage of Non-Performing loan (NPLs) to total loan ratio, limited resource profile with high dependence on Banks & Financial Institutions (BFIs) borrowings, exposure to regulatory risks related to microfinance industry, inherent risk involved in the microfinance industry including socio political risks and competition from other Micro Finance Institutions (MFIs) and Co-operatives.

Asha Laghubitta is a ‘D’ class National Level Microfinance Institution licensed by Nepal Rastra Bank with its registered office in Kakani 6, Nuwakot. ALBSL earned Rs 11 Mn net profit during FY18 on Rs 1292 Mn loan portfolio and Rs 257 Mn deposit as on July 16, 2018. As on April 13, 2018 it has 0.81% and 0.45% market share in terms of loan portfolio and deposit of microfinance industry respectively. 100% share capital of the company is held by promoter shareholders.