ICRA Nepal provides Grade 4 rating to upcoming right shares of Deva Bikas Bank

The credit rating agency, ICRA Nepal (ICRANP) IPO Grade 4 rating to the upcoming right issue of Deva Bikas Bank Limited (DBBL). This rating signifies below average fundamentals. DBBL has received approval from SEBON to float 65,33,108.59 unit shares  at Rs 100 per share. As per ICRA Nepal, the grading factors in DBBL’s ability to achieve moderate portfolio growth which was however aided by very high growth of about 50% in FY2017. Comfortable capitalization, experienced management team and diversified franchise remain positive for incremental growth prospect of DBBL. ICRA Nepal also takes note of the scale advantages that the bank could garner going forward being a prominent national level player and moderate granularity of its portfolio. However, the grading remains constrained by the recent increase in stress over assets quality of DBBL which could be further accentuated by acquisition of entities with weak assets quality profile. The grading also takes into account the bank’s cost of funds generally remains higher vs. the industry despite better CASA mix. Furthermore, bank’s weak competitive positioning vis-à-vis commercial banks with finer lending rates; especially in the “base rate plus” lending regime introduced by Nepal Rastra Bank may impact future growth. 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. Deva Bikas Bank has earned Rs 14.06 crore as net profit in the second quarter of the fiscal year. The current paid up capital of the development bank stands at Rs 1.63 arba and after the issuance of the right shares, the paid up capital of the bank will reach Rs 2.28 arba. Its last traded closing price (LTP) stands at Rs 185 as on Falgun 3, 2074. Notice