Care Ratings provides below average fundamentals to right issue of Civil Laghubitta; total of 11.41 Lakh units to be issued

CARE Ratings Nepal Ltd. (CRNL) has assigned grading of “CARE-NP IPO Grade 4” to the proposed Right Share Issue of Civil Laghubitta Bittiya Sanstha Ltd. (CLBSL). “CARE-NP IPO Grade 4” indicates Below Average Fundamentals. The grade assigned to any individual issue represents a relative assessment of the ‘fundamentals’ of the issuer. CLBSL proposes to issue 1.14114 Million shares of face value of Rs.100 each at par aggregating Rs.114.114 Million.

The grading assigned to CLBSL is constrained by deteriorating asset quality over the period, low market shares in term of credit portfolio and deposit, concentrated credit portfolio distribution towards animal husbandry and wholesale and retail sector, and concentrated resource profile with high dependence on Banks & Financial Institutions (BFIs) borrowings. The grading is also constrained by competition from other Micro Finance Institutions (MFIs) and Co-operatives, and the inherent risk involved in the microfinance industry.

The grading, however, derives strength from strong institutional promoter, experienced board members and management team, and moderate track record of operation coupled with geographical diversification of business. The grading also considered adequate capitalization level, considerable growth in business over the period, moderate liquidity profile, and growth in total income and net profit over the period.

Source: CARE Ratings Nepal