Net Profit of Finance Companies Decreased in Q2; Find Out the Performance of the Listed Finance Companies

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.

NEPSE currently has 15 listed finance companies for the year 2022. In order 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 second quarter of FY 2079/2080 that can be useful for investment purposes. The industry average includes all the 15 finance companies.

Financial Overview:

Net Profit:

Among the finance companies, Manjushree Finance Limited (MFIL) earned the most profit of Rs. 13.65 crores followed by Gurkhas Finance Limited (GUFL) and Goodwill Finance Limited (GFCL) with Rs. 6.72 crores and 4.69 crores respectively. Out of the 15 finance companies, Best Finance Limited (BFC) has obtained the highest growth in net profit of 591.97% as compared to the second quarter of previous financial year.

The report also shows that, 3 companies viz. Reliance Finance Limited(RLFL), Progressive Finance Limited (PROFL) and Samriddhi Finance Company Limited (SFCL) has reported loss for the relevant period. Whereas, 8 companies have reported decline in net profit as compared to the preceding year's Q2. 

Paid-Up Capital:

Among the finance companies, Manjushree Finance Limited (MFIL) has the highest paid-up capital of Rs. 1.35 Arba followed by ICFC Finance Limited (ICFC) and Reliance Finance Limited(RLFL) with Rs. 1.18 Arba and Rs. 1.05 Arba respectively.

On the other hand, Multipurpose Finance Company Limited (MPFL) has the least share capital of Rs. 45 Crores. The industry average share capital is Rs. 91 Crores, and 7 companies have reported lower than average share capital. 

Reserve and Surplus:

In terms of Reserve and surplus, Gurkhas Finance Limited (GUFL) has the highest Reserve of Rs. 78 crores. Similarly, Goodwill Finance Limited (GFCL) has a reserve of Rs.69 crores and Manjushree Finance Limited (MFIL) has Rs. 59 crores in reserves and surplus.  However, Samriddhi Finance Company Limited (SFCL) has negative reserves of Rs. 20 Crores.

Deposit from customers:

Financial institutions are trying their best to attract their possible customers with the best services they can provide. As of the second quarter of FY 2079/2080, ICFC Finance Limited (ICFC) has been able to collect the highest deposit from its customers of Rs. 18.82 Arba. Similarly,  Manjushree Finance Limited (MFIL) has collected Rs. 12.04 Arba and Goodwill Finance Limited (GFCL) has been able to collect Rs. 11.62 Arba in a deposit.

Apart from highest, Multipurpose Finance Company Limited (MPFL) has reported to collect lowest deposits worth Rs. 1.30 Arba.

Loans and Advances:

In terms of Loans and advances, ICFC Finance Limited (ICFC) has provided loans and advances of Rs. 13.85 Arba followed by Manjushree Finance Limited (MFIL) and Goodwill Finance Limited (GFCL) of Rs. 11.16 Arba and Rs. 9.40 Arba respectively.

Multipurpose Finance Company Limited (MPFL) has disbursed loans of Rs. 97 Crores which is a finance company operating in 1 to 3 districts.

Net Interest Income:

Net interest income is the net earnings of finance companies through their core business of collecting deposits and lending loans. The company with the highest net interest income is Manjushree Finance Limited (MFIL) with an income of Rs 32.47 Crores followed by ICFC Finance Limited (ICFC) with an income of Rs 28.34 Crores and Pokhara Finance Limited (PFL) with an income of Rs 23.09 Crores.

Provisions for the period (Impairment/Reversal):

Companies have set aside a certain amount in loan loss provision and have delayed the loan repayment of several borrowers. A total of Rs 64.07 Crores of amount has been shown in an impairment charge for a loan and other losses. ICFC Finance Limited (ICFC) has the highest impairment charge for a loan and other losses with Rs 10.56 Crores followed by Pokhara Finance Limited (PFL) with a total of Rs. 8.33 crores. In the same vein, Gurkhas Finance Limited (GUFL) has the reversal impairment charge for a loan and other losses with Rs. 5.79 Crores.

* - Reversal and + Provision

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 second quarter of FY 2079/2080, Majushree Finance Limited (MFIL) has earned Rs. 20.20 per share followed by Gurkhas Finance Limited (GUFL) of Rs. 15.47.

3 companies, Reliance, Progressive and Samriddhi Finance have however reported negative EPS for this quarter.

Non-Performing Loan:

In today’s context, the concern of investors simply does not rest upon which bank has more loans. The nature of the loan portfolio equally matters. Multipurpose Finance Company Limited (MPFL) reported the lowest NPL of 1.03% in terms of asset quality. 

Nepal Finance Limited (NFS) has reported the highest NPL of 14.19%, followed by  Samriddhi Finance Company Limited (SFCL) with an NPL of 13.92%.

Price to Earnings ratio:

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.

The finance companies with the least P/E ratio are Manjushree Finance Limited (MFIL), Gurkhas Finance Limited (GUFL), and Goodwill Finance Limited (GFCL) with P/E of 22.42 times, 37.48 times and 50.39 times respectively.

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.

Also, the mentioned P/E is calculated as per closing price of scrips as of Q2 end. 

Net worth per share:

As of the second quarter of FY 2079/2080, Gurkhas Finance Limited (GUFL) has reported a Net worth per share of Rs. 189.89. Similarly, Goodwill Finance Limited (GFCL) has reported a net worth per share of Rs. 172.85 and ICFC Finance Limited (ICFC) of Rs. 147.68.

Finally, the table below shows provides a full picture of major indicators of all 15 finance companies as of the second quarter of FY 2079-2080.