ICRA Nepal assigns IPO Grade 4 rating to upcoming 9.75 lakh units FPO shares of Nepal Grameen Bikas Bank

ICRA Nepal has assigned [ICRANP] IPO Grade 4 rating to the upcoming Further Public Offering (FPO) of Nepal Grameen Bikas Bank Limited (NGBBL). This rating signifies below average fundamentals. NGBBL has received approval from SEBON to float 9,75,000 units FPO shares at Rs 100 per share i.e. without adding any premium to the par value. Prabhu Capital Limited has been assigned issue manager for this FPO. As per Icra Nepal, The grading factors in NGBBL’s strong promoters profile (~35% holding by Government of Nepal (GoN), ~4% holding by Nepal Rastra Bank (NRB) and ~17% holding by NRB licensed Class A commercial Banks) which is expected to strengthen the governance and funding profile of NGBBL. The grading is however constrained by change in regulatory environment which could affect the incremental funding profile and profitability of NGBBL. Through Monetary Policy of FY17, NRB has directed class A commercial banks to maintain 2% (out of total 5%) deprived sector lending (DSL) target in the form of direct loans (rest 3% could be through intermediaries). As on mid-April 2017, class A commercial banks accounted for ~78% of the total bank borrowings of NGBBL. NGBBL has earned net profit of Rs 19.58 crore in the third quarter of the FY 2073/74. Its paid up capital stands at Rs 55.75 crore with promoter and general public share ownership at 82.13% and 17.87% respectively. After the FPO, its paid up capital will reach Rs 65.50 crore with promoter – general public shareholding structure at 69.90% and 30.10% respectively. NGBBL is a national-level microfinance development bank based in Butwal, formed in 2014 by the merger of 5 microfinance companies: Purwanchal Grameen Bikas Bank, Madhyamanchal Grameen Bikas Bank, Paschimanchal Grameen Bikas Bank, Madhya Paschimanchal Grameen Bikas Bank and Sudur Paschimanchal Grameen Bikas Bank Limited. ICRA Nepal assigns IPO grading on a scale of IPO Grade 1 through IPO Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals.