Which companies are worth investing among finance companies? Find out the comprehensive comparative analysis of third quarter to figure out

Finance companies are licensed by the central bank with an objective to provide different banking and financial services to the general public since the outreach of the banking and financial services in Nepal is still lagging behind. Frequent mergers among finance companies or acquisitions by commercial and development banks have brought fluctuation in the number of these companies. However, Nepal Rastra Bank (NRB) has realized the essence of finance companies in Nepal. As a result, NEPSE currently has 18 listed companies so far. 

Thus, to facilitate the enthusiasts in the secondary market, the article has been prepared accumulating analysis of all the finance companies with respect to their performance in the third quarter of FY 2077/2078 that can be useful for investment purposes. The industry average includes all 18 finance companies. 

Financial Overview:

Net Profit:

In terms of Net Profit, Manjushree Finance Limited (MFIL) earned the most profit of Rs. 37.51 crores followed by Gurkhas Finance Limited (GUFL) and ICFC Finance Limited (ICFC) with Rs. 27.37 crores and 17.79 crores respectively.

On the other end, Multipurpose Finance Company Limited (MPFL) reported the lowest net profit of Rs. 30 lakhs from the sector.

Distributable Profit:

Manjushree Finance Limited (MFIL) reported the highest distributable profit of Rs. 28.21 crores. On the others side, 3 companies reported zero distributable profit. 

Net Interest Income:

In terms of Net Interest Income, Manjushree Finance Limited (MFIL) earned Rs. 28.65 crores. Similarly, Srijana Finance Limited (SFFIL) and Pokhara Finance Limited (PFL) earned Rs. 28.12 crores and Rs. 25.21 crores respectively.

Paid-Up Capital:

Among all the companies, United Finance Limited (UFL) has the highest paid-up capital of Rs. 1.04 Arba followed by ICFC Finance Limited (ICFC) and Manjushree Finance Limited (MFIL) with Rs. 1.02 Arba and Rs. 96.53 crores respectively.

Reserve and Surplus:

In terms of Reserve and surplus, Gurkhas Finance Limited (GUFL) has the highest Reserve of Rs. 82.95 crores. Similarly, Manjushree Finance Limited (MFIL) has a reserve of Rs. 66.55 crores and United Finance Limited (UFL) has Rs. 61.9 crores in reserve.

(Note: Reserve and Surplus amount includes Share Premium, Retained Earnings, and Reserve)

Deposit from customers:

Financial institutions are trying their best to attract their possible customers with the best services they can provide. As of the third quarter of FY 2077/2078, ICFC Finance Limited (ICFC) has been able to collect the highest deposit from its customers of Rs. 14.33 Arba. Similarly, Pokhara Finance Limited (PFL) has collected Rs. 9.01 Arba and Goodwill Finance Limited (GFCL) has been able to collect Rs. 8.91 Arba in a deposit.

Loans and Advances:

In terms of Loans and advances, ICFC Finance Limited (ICFC) has provided loans and advances of Rs. 10.22 Arba followed by Goodwill Finance Limited (GFCL) and Srijana Finance Limited (SFFL) of Rs. 7.45 Arba and Rs. 6.81 Arba respectively.

Earnings per share:

Since earnings per share (EPS) gives a great insight into the company, investors consider this metric as one of the important metrics while buying a stock.

As of the third quarter of FY 2077/2078, Lalitpur Finance Limited (LFC) has earned Rs. 60.13 per share followed by Manjushree Finance Limited (MFIL) and Gurkhas Finance Limited (GUFL) of Rs. 51.82 and Rs. 42.05 respectively.

Net worth per share:

As of the third quarter of FY 2077/2078, Gurkhas Finance Limited (GUFL) has reported a Net worth per share of Rs. 195.58. Similarly, Goodwill Finance Limited (GFCL) has reported a net worth per share of Rs. 171.29 and Manjushree Finance Limited (MFIL) of Rs. 168.94.

Price to Earnings ratio:

The price to Earnings (P/E) ratio tells investors how much the stock is selling for relative to its earnings. This indicator gives a clear picture of how much we are paying to get a rupee of earnings. So, lower the P/E better the deal.

While the P/E ratio tells us what we are paying for a rupee of earning, to know more about the company, investors have to dig into more metrics.

(NOTE: Since the ratio calculated below factored in the closing price of quarter end, Investors are requested to calculate the P/E ratio factoring in current market price.)

Non-Performing Loan:

Non-performing Loan gives investors and companies a wider picture of loan quality the company has been disbursing.

In the third quarter of FY 2077/2078, Guheshwori Merchant Banking & Finance Limited (GMFIL) reported the least NPL of 0.25%.

Lalitpur Finance Limited (LFC) reported the highest NPL of 96.52% in this quarter.

Capital Adequacy Ratio:

In a nutshell: