Siddhartha Investment Growth Scheme 2 opens from Shrawan 23; All information you need to know in one place

Tue, Aug 6, 2019 9:05 AM on Exclusive, Mutual Fund, Stock Market, Latest,

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Company Profile

The mutual fund scheme “SIGS2” is promoted by Siddhartha Bank and managed by Siddhartha Capital.

Siddhartha Bank Limited (SBL) 18th Class ‘A’ Commercial Bank to be licensed by NRB, started its operation in December 2002. As on mid-April 2018, SBL has market share of about 3.5% in terms of deposit base and total advances in Nepalese banking industry (~4% in the commercial bank industry deposit and advances). As on mid-July 2018, SBL has presence throughout the country through its 160 branches, 3 extension counters and 113 ATMs.

As of mid-July 2018, SBL’s shareholding is divided among promoter and public shareholders in the ratio of 51:49. The bank is promoted by individuals and private institutions related to different business house of Nepal, mainly Kedia Group.

Siddhartha Capital Siddhartha Capital Limited (SCL) is a 51% subsidiary of Siddhartha Bank Limited; the balance being held largely by other individual shareholders associated as promoters of the bank. At present, SCL is involved in fund management, issue management, underwriting, share registration, private placement, financial advisory services and depository participant. SCL has obtained the MF depository’s license in addition to the fund manager’s license from SEBON (as per the Mutual Fund Regulation, 2010) and is currently acting in both capacities with respect to its two MF schemes i.e. SEOS and SEF. Moreover, SCL has also obtained membership from CDS and Clearing Limited (Central Depository Company).

About the issue

Siddhartha Capital Limited sets to open a new close end mutual fund scheme “Siddhartha Investment Growth Scheme 2” worth Rs 1.4 arba with the maturity of 10 years.

The opening date of this fund is on Shrawan 23, 2076 and the closing date is on Shrawan 27, 2076 at the earliest. If the application is not adequately subscribed the closing date will be extended up to Bhadra 20, 2076.

This fund is managed by Siddhartha Capital Limited and sponsored by Siddhartha Bank limited.

The issue will be of 14,00,00,000 units worth Rs 1.4 arba and per unit cost is Rs 10. An investor can apply for minimum of 100 units and maximum of 1.4 crore units.

85% of the total issue i.e. 11.90 crore units will be open for general public and remaining 15% i.e 2.1 crore units will be kept as seed capital for sponsor Siddhartha Bank Limited and fund manager Siddhartha Capital Limited.

This is the fourth mutual fund managed by the Siddhartha Capital Limited. Earlier there was 3 fund in the market viz Siddhartha Investment Growth Scheme 1 (already matured), Siddhartha Equity Oriented Scheme (already matured) and Siddhartha Equity Fund.

Dividend Payout

The dividend will be paid out of realized profits in proportion to investments made. The Retained earnings will be re-invested if any.

Supervisors of SIGS2

General asset allocation of the proposed scheme's portfolio

Capital structure of Siddhartha Capital

Promoters of Siddhartha Capital

Board of directors of Siddhartha Capital

Management team of Siddhartha Capital

Investment avenues

Securities that are registered with SEBON
Securities called for public offering
Securities that are listed in NEPSE
Debentures, Treasury Bills and other instruments of money market issued by Government of Nepal or Government Agencies receiving full guarantee or protection of GoN or NRB
Bank deposits
Money Market Instruments
Other areas as prescribed by SEBON

ICRA Rating of Siddhartha Capital

ICRA Nepal has reaffirmed the [ICRANP] AMC Quality 3+ (AMC 3+) fund management quality rating (FMQR) assigned to Siddhartha Capital Limited (SCL), indicating adequate assurance on the fund management quality.

Strengths and opportunities

Healthy performance of the mutual fund (MF) schemes managed by SCL so far
Adequately established organizational structure to manage the existing as well as the proposed scheme
Relatively long track record in MF management, when compared to its peers
Ownership and continued support of its parent Siddhartha Bank Limited (rated [ICRANP-IR] BBB+) and takes note of the satisfactory investor service practices of SCL, while adhering to the regulatory guidelines and investment policies
Experienced senior management and fund supervisors involved in the management and supervision of the schemes
A stable Government in Nepal, with a target to increase the pace of the country’s economic growth along with the ongoing improvements in the capital market and the regulatory framework, remain positives for the development of capital market and hence fund returns

Weaknesses and threats

Extent of involvement of the supervisors in managing the schemes is not clearly mandated through a legal framework and hence remains a rating concern.
High volatility in the market index in recent periods which has been lowering the pace of investment by the MF schemes and hence limiting the growth in their net assets value (NAV)
Any changes impacting the market could have a bearing on the MF performance given the high dependence on equity investment and hence remains a rating concern
Unavailability of hedging tools for investment in the market and the evolving nature of the MF industry
The existing and proposed schemes are all equity-oriented ones and hence have limited diversification avenues in debt markets. Given the equity market being dominated mostly by the financial sector, the ability of SCL to diversify will also remained constrained

ICRA Rating of Siddhartha Bank

ICRA Nepal also reaffirms the rating of [ICRANP-IR] BBB+ (pronounced ICRA NP Issuer Rating Triple B Plus) assigned to SBL. Issuer rating BBB+ is one notch higher than BBB. [ICRANP-IR] BBB+ rating is considered moderate-credit-quality rating assigned by ICRA Nepal. The rated entity carries higher than average credit risk.

Strengths and opportunities

Ability to maintain its market share along with recent improvement in assets quality indicators
Strong geographical presence of the bank (through 160 branches as of now), especially after recent branch expansion
Adequate track record of the bank (operating since December 2002), promoters with adequate experience in financial sector and experienced and stable management team of the bank
Good profitability profile of the bank, supported by fair Net Interest Margins (NIMs)
Improvement of overall financial profile and assets quality of the bank also indicates at successful integration of resources post-merger in FY16, which has been factored into the rating.
With sizeable addition to branch network and concomitant increase in penetration to wider customer base, CASA proportion of SBL is likely to improve going forward.

Weaknesses and threats

Relatively inferior deposit profile vis-à-vis commercial bank average because of relatively higher reliance on institutional deposits over the years to fund high credit growth rate of the bank.
Lower CASA proportion has led to relatively higher cost of deposits for SBL among peers
Concentration of deposits among top depositors also remains on relatively higher side, despite improvement in past 12-15 month
Moderate capitalization profile of the bank vis-à-vis peers (CRAR of 12.10% on mid-July 2018 vs. regulatory minimum of 11% and Tier 1 of 10.84% vs 8% regulatory requirement). 1

Source: https://icranepal.com/releases.php

Financial performance of Siddhartha Bank

*The financials of FY 2072/73 are as per GAAP and rest are as per NFRS.

Financial performance of Siddhartha Capital

Performance of Siddhartha Investment Growth Fund 1

Siddhartha Investment Growth Scheme – 1 (SIGS1), the first mutual fund scheme managed by Siddhartha Capital, has matured as of Poush 9, 2074.SIGS–1 was a 5 years closed-end fund with fund size of Rs 50 crore. Its LTP stood at Rs 20.09 and latest weekly NAV stood at Rs 21.33 as of Mangsir 22, 2074.

Performance of Siddhartha Equity Fund

Siddhartha Equity Fund (SEF) is a closed-end 10 years’ mutual fund, which began with a total fund of Rs 1.50 Arba. SEF has posted a net profit of Rs 15.89 crore till the month of Asadh, 2076.

Performance of Siddhartha Equity Oriented Scheme

Siddhartha Equity Oriented Scheme (SEOS) is a closed ended 5 years’ mutual fund scheme, which began with a total fund of Rs 100 Crore. SEOS has reported a net profit of Rs 9.68 crore till Asadh end, 2076. The trading of SEOS has been halted from 6th Shrawan, 2076, as the scheme has reached maturity. The LTP as of 5th Shrawan, 2076 stands at Rs.10.85 per unit.

The unit holders will be redeemed after the completion of all legal processing related to the maturity of the scheme.