Proposed right shares of City Express Finance receives poor grade from Care Ratings; company to issue 100% right shares worth Rs.40 Crore

CRNL has assigned grading of “CARE-NP IPO Grade 5” to the proposed Rights Share Issue of City Express Finance Company Limited (CEFL). “CARE-NP IPO Grade 5” indicates Poor Fundamentals. CEFL proposes 100% rights share issue of 4 Million number of equity shares of face value of Rs.100 each at par aggregating Rs.400 Million.

The grading assigned to the rights share issue of CEFL is constrained by low market share in the industry, operating losses, substantial decline in PAT during 9MFY19, decline in CASA proportion, and negative reserve and surplus. The grading also factors in high Gross Non-Performing loan (GNPL) although improved as on June 15, 2019 (as per provisional results). The grading is also constrained by geographical concentration, exposure to regulatory risks related to finance industry and competition from other finance companies and banks.

The grading, however, derives strength from experienced director and management team, adequate capital adequacy ratio and satisfactory status of the recovery of Non-Performing Loan (NPL) and Non-Banking Assets (NBA). The grading also derives support from strengthened loan & advance and deposit profile during 9MFY19 (refers to 9 months period ended mid-April 2019) and comfortable liquidity profile of the company.

Source: Care Ratings Nepal Limited