Have you applied for NMB50 equity-focused Mutual Fund? Take a look before you do; All information you need in one place

Thu, Aug 1, 2019 7:31 AM on Company Analysis, Exclusive, Mutual Fund, Stock Market, Latest,

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Company Profile

NMB Capital Limited's new mutual fund scheme “NMB50” is promoted by NMB Bank and managed by NMB Capital.

NMB Bank Limited (NMB) was established on Poush 04, 2053 as ‘C-class’ financial institution, which upgraded to ‘A-class’ commercial bank on Baisakh 24, 2065. The bank’s 17 percent stake lies with FMO Netherlands and this company has been rated as AAA by S&P and Fitch. Apart from FMO, the other institutional investor includes Employee Provident Fund, Young Lean Realty (Malaysia) Holding Realty (with 5% stake) and other individual shareholders from business houses of Nepal. Over the years it has gone through merger and acquisition will the following institutions:

Clean energy development bank
Bhrikuti Development bank
Pathibhara Bikas Bank
Prudential Finance company

Currently NMB bank has a network of 110 branches all over the country along with 4 extension counter and numerous branchless banking units.

NMB Capital is a wholly-owned subsidiary of NMB Bank Limited. At present, NMB Capital is involved in fund management, issue management, underwriting, share registration, private placement, financial advisory services, depository and asset management services. NMB Capital has an MF depository license as well as a fund manager license from Securities Board of Nepal (SEBON; as per the Mutual Fund Regulation, 2010) and is currently acting in both capacities with respect to its two close ended MF schemes i.e. NMBSF1 and NMBHF1. Moreover, NMB Capital has obtained membership from CDS and Clearing Limited (a central depository company).

About the issue

NMB 50, managed by NMB Capital Limited and sponsored by NMB Bank Limited is floating its public issue of 12 crore units mutual fund scheme worth Rs 1.2 arba from Shrawan 13, 2076.

The early closing date of this mutual fund issue is on Shrawan 16, 2076 if the issue got over subscription or else this issue can be extended up to Bhadra 10, 2076.

NMB 50 is the NMB Capital Limited third mutual fund scheme, and is a 7-years closed-end fund which will be listed on NEPSE for trading. Under the current mutual fund regulation, 15% units i.e. 1.80 crore units are reserved for fund manager and fund sponsor. Remaining 10.20 crore units will be floated to the general public.

Interested people must apply for a minimum of 100 units and they can apply for maximum 1.2 crore units. Interested applicants can apply through ASBA-approved banks from all 77 districts across the country.

NMB Capital Limited is a subsidiary of NMB Bank Limited licensed by SEBON to provide merchant banking, issue management, corporate advisory, underwriting and mutual fund services.

Dividend Payout

The dividend will be paid out of realized profits in proportion to investments made. The Retained earnings will be re-invested if any.

Supervisors of NMB50

General asset allocation of the proposed scheme's portfolio

Capital structure of NMB Bank

Capital structure of NMB Capital

Board of directors of NMB Bank

Board of directors of NMB Capital

Management team of NMB Bank

Management team of NMB Capital

Investment avenues

Securities that are registered with SEBON
Securities called for public offering
Securities that are listed in NEPSE
Debentures, Treasury Bills and other instruments of money market issued by Government of Nepal or Government Agencies receiving full guarantee or protection of GoN or NRB
Bank deposits
Money Market Instruments
Other areas as prescribed by SEBON

ICRA Rating of NMB Capital

ICRA Nepal has reaffirmed the [ICRANP] AMC Quality 3+ (AMC 3+) fund management quality rating (FMQR) assigned to NMB Capital Limited, indicating adequate assurance on the fund management quality.

Strengths and opportunities

Relatively healthy performance of the mutual fund (MF) schemes being managed by the company
Adequately established organizational structure to manage the existing/proposed schemes
Fair track record in MF management, compared to its peers, along with its satisfactory investor service practices while adhering to the regulatory guidelines and investment policies
Ownership and continued technical support from its parent, NMB Bank Limited (rated [ICRANP-IR] A-)
Experienced senior management and fund supervisors, involved in the management and supervision of the schemes
Stable Government with a target to increase the pace of the country’s economic growth along with the ongoing improvement in the capital market and the regulatory framework remain positives for market development and hence fund returns.

Weaknesses and threats

The extent of involvement of the supervisors in managing the schemes is not clearly mandated through a legal framework and hence remains a rating concern
High volatility in the market index in recent periods leading to muted equity returns and thereby impacting the net asset value (NAV) of the MFs
Volatility in the market could be partly attributed to the tightening liquidity in banking, the increase in listed shares over the last few years and the lack of large institutional investors/market makers
Any changes in the regulatory framework or banking liquidity, which could impact the market, could also have a bearing on the scheme’s performance, given the AMC’s targets to increase the equity investment in its second scheme as well as its proposed scheme
Equity market is currently dominated mostly by the financial sector, so the ability of the fund manager to diversify will also remain constrained
Limited diversification avenues even in debt markets, the unavailability of hedging tools for investment in the market and the evolving nature of the MF industry

ICRA Rating of NMB Bank

ICRA Nepal has reaffirmed the issuer rating for NMB at [ICRANP-IR] A- (pronounced ICRA NP issuer rating A minus). This is considered to be an adequate credit quality rating. Strengths and opportunities:

Bank’s strong capitalization (capital to risk assets ratio (CRAR) of 15.36% as of mid-October 2018) following fresh equity infusion in FY2017 and FY2018.
Strong capitalization profile along with its extensive track record, experienced management team and good franchise network augurs well for its incremental growth prospects.
Strong institutional promoters (~24% stake held by FMO1 and Employees’ Provident Fund Nepal, including board representation from both entities, thereby adding to the governance aspect of the bank).
Moderate and steady rate of business growth
Established underwriting norms
Risk management framework along with good asset quality (gross non-performing assets (NPAs) of 0.76% as of mid-October 2018)
Solvency indicators.
Adequate fair profitability (return on assets (RoA) of ~1.9%) supported by adequate net interest margins (NIMs) of ~3% and
Good non-interest income levels.
Higher credit-to-deposit ratio has helped the bank offset the impact of the rising cost of funds, thereby stabilizing NIMs and supporting profitability.

Weaknesses and threats:

Tight liquidity situation faced by the Nepalese banking industry, including NMB, because of higher growth in banking sector credit vis-à-vis deposits during the last four to five years.
Decline in NMB’s liquidity ratio with a commensurate increase in the credit-to-deposit ratio.
High deposit concentration (~32% of the total deposits are among the top 20 depositors) has lowered the liquidity cushion available to the bank.
Credit concentration among the top borrower groups also remains on the higher side (~27% of the total credit was among the top 20 borrower groups as of mid-October 2018).
Moderate funding profile.
Below industry average current and savings deposit (CASA) mix (37% as of mid-October 2018 vs. the commercial bank average of ~43%), which reflects in the higher cost of funds for NMB vis-à-vis its established peers.
Bank’s relatively higher operating expense ratio, has resulted in a relatively higher base rate for NMB, which is a competitive disadvantage in the base rate plus lending model followed by the banking industry.
Uncertain operating environment faced by banks in Nepal because of high credit growth, rise in interest rates on the deposit and lending side, rising competition despite consolidation, and tight liquidity, which may impact the asset quality in coming periods.

Source: https://icranepal.com/releases.php

Financial performance of NMB Bank

Financial performance of NMB Capital

Performance of NMB Hybrid Fund -1

NMB Hybrid Fund L-1 (NMBHF-1) is a 7 years closed-end mutual fund scheme of NMB Capital. The scheme began with a fund size of Rs 1 arba, and has invested only Rs 28.86 crore in listed shares and Rs 2.42 crore in the public issue, right shares and bonus shares as of Ashad 2076 and has invested Rs 13.50 crore in bonds and debentures.

Performance of NMB Sulav Investment Fund -1

NMB Sulav Investment Fund-1 (NMBSF-1) is a 5 years closed-end mutual fund scheme managed by NMB Capital. It began with a fund size of Rs 75 crore and as of Ashad end 2076 it has investment of Rs 11.79 crore in the listed shares and Rs 1.07 crore in the public issue, right shares and bonus shares and Rs 17.40 crore in bonds and debentures. The fund will be maturing on Kartik 03, 2076.