Care Ratings Nepal assigns "IPO Grade 4" to the upcoming 3.35 lakh unit IPO of Ganapati Microfinance; Rating indicates below average fundamentals

Care Ratings Nepal Limited has assigned grading of “CARE-NP IPO Grade 4” to the proposed Initial Public Issue of Ganapati Microfinance Bittiya Sanstha Limited (GMBSL). “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. GMBSL proposes to issue 3.35 lakh numbers of equity shares of face value of Rs.100 each at par aggregating Rs. 33.50 million.

The grading assigned to the Initial Public issue of GMBSL is constrained by short track record and small scale of operation, weak financial performance due to initial year of operation, however improving over the period, increasing Non-Performing Loan (NPLs) to total loan and high dependence of resource profile on Banks & Financial Institutions (BFIs) borrowings.

The grading, however, derives strength from institutional promoter as well as experience board and management team, ability of the company to grow business over the short track of operations, adequate Capital Adequacy Ratio (CAR), comfortable liquidity profile, diversified credit portfolio and adequate geographical diversified reach in its area of operation.

Ganapati Microfinance Bittiya Sanstha Ltd. is a “D” class National Level Microfinance Institution incorporated on June 27, 2016, licensed by Nepal Rastra Bank (NRB) on November 15, 2016 and commenced its operation from Dec 9, 2016 under Bank and Financial Institution Act 2006. It is primarily engaged in providing microfinance loan based on the Joint Liability Group (JLG) model with each group consisting of minimum five members. It has its registered office in Suklagandaki Municipality, Tanahun, Nepal. As on October 17, 2018 it has loan portfolio of Rs 620.08 Mn and deposit base of Rs 153.75 Mn; and have 11,402 members and 8338 borrowers. Guheswori Merchant Banking and Finance Ltd (32.14%) and Mr. Yubraj Bhandari (14.29%) are the major shareholders of the company.