ICRA Nepal assigns IPO grade 4 to Rs 3 crore worth of IPO shares of CBIL Capital
Mon, Jul 16, 2018 1:08 AM on Credit Rating, IPO/FPO News, Latest, Stock Market,
ICRA Nepal Limited has assigned a [ICRANP] IPO Grade 4 (Pronounced as ICRA NP IPO Grade Four) to the Rs.3 crore worth of Initial Public Offer of CBIL Capital Limited. Instruments with this grading are considered to have below-average fundamentals.
ICRA Nepal assigns grading on a scale of Grade 1 through Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. For the Grading categories 2, 3 and 4, the sign of + (plus) indicates their relative better position within the Grading categories concerned.
IPO Grade is not a recommendation to buy, sell or hold securities nor it is a comment on the price or valuation of securities.
The grading is constrained by limited track of operations, highly competitive merchant banking and investment banking sector in Nepal with presence of established players along with further incoming players in industry. The grading also takes note of lack of diversity in earnings profile of CBIL so far with concentration towards investment income.
As the company started its merchant-banking services only from FY16, CBIL has limited track record as merchant banker and has managed only few issues so far. In addition, revenue stream from this line of service has reduced significantly compared to few years ago, mainly due to introduction of ASBA. Merchant-bankers were earlier benefitted by sizeable interest earnings from allotment to refund period in these issues which witnessed massive oversubscription.
CBIL reported profit after tax (PAT) of NPR 4 million during FY17 as against PAT of NPR 11 million reported for FY16. For 9MFY2018, CBIL’s PAT remained negative at ~NPR 17 million. CBIL’s profitability for FY16 was fully supported by investment income including gains on share trading, revaluation gains and interest income. However, market has been witnessing downturn thereafter and hence investment in shares have witnessed sizeable losses during FY17 and 9MFY18 (~NPR 18 million).
