RURAL MICROFINANCE DEVELOPMENT CENTRE LTD.
Note: IPO applied for more than 50 units should be divisible by 10 and when applied for more than Rs 50,000 the payment should be made through account payee check.
Issue Manager: Ace Capital Limited
Introduction of Rural Microfinance Development Centre Ltd.
Rural Microfinance Development Centre Ltd was established as a public company in 2056/08/20 B.S. under ‘Company Act, 1996’ with the mandate to operate as a wholesale lending organization within the framework of the then ‘Development Bank Act, 1995’.
Coming to the year 2064/09/30, the company again registered itself as a Class ‘D’ category financial institution licensed by Nepal Rastra Bank, which was incorporated under the Company Act. and licensed under the Bank and Financial Institutions Act (BAFIA) 2063.
The bank is promoted by institutional promoters Nepal Rastra Bank (NRB) - 6.58%, 13 Class A Commercial Banks - 90.57%, 5 Class D Microfinance Institution (MFI) - 2.42% and Deposit Insurance and Credit Guarantee Corporation (DICGC) - 0.43% .
The bank provides wholesale credit along with the institutional strengthening and capacity building supports to its partner MFIs with a view to promote and develop the microfinance sector in the country. The bank mainly focuses on reaching out to the largest number of the poor and disadvantaged households with appropriate microfinance services to enable them to realize their untapped potentials of development through the network of partner MFIs. Along with it, the bank also monitors and supervises client MFIs' activities to ascertain adherence to prudential and non prudential regulations.
Currently, RMDC is the largest wholesale lending organization for MFIs in the country as its outreach shares nearly four-fifth of the entire microfinance industry’s business in the country.
The Bank has been registered with authorized capital of NPR 1,000 million and currently holds issued capital of NPR 520 million and paid up capital of NPR 364 million. Until the last fiscal year the bank paid up stood at Rs 320 Million but with the injection of NRs 14 million (with premium of NRs 25.48 million) and NRs 30 million (with premium of NRs 24 million) by Siddhartha Bank Ltd and International Finance Corporation respectively in this fiscal year, the bank’s paid up capital came to stand at Rs 364 million.
The Bank is firmly motivated to emerge as a financially viable, operationally sustainable and professionally efficient apex institution of microfinance in Nepal.
The bank registered office is situated at ward no 31, Putalisadak, Kathmandu, Nepal, which is also the central office of the Bank. The bank can serve in all the 75 districts of Nepal.
Major shareholders in Rural Microfinance Development Centre Ltd. as per the Prospects and Annual Report 2068/69
Other Shareholders of the Company
Board of Directors of Rural Microfinance Development Centre Ltd.
Mr. Ashok SJB Rana, Chairman
Qualification: Bachelor Degree in Economics from the George Mason University, Fairfax V.A. USA.
Work Experience: He is the Chief Executive Officer of Himalayan Bank Limited and President of the Nepal Banker’s Association. He has over 20 years of work experience in commercial banking.
Mr. Ramjee Regmi, Member
Qualification: Masters of Arts (MA) in Economics and Master of Public Administration (MPA) in Human Resource from Tribhuwan University (TU).
Work Experience: He works in Nepal Rastra Bank (NRB) as an Executive Director of the Financial Management Department. He has worked for 28 years with the Nepal Rastra Bank.
Mr. Anil K Shrestha, Member
Qualification: Master of Business Administration (MBA) from Tribhuwan University (TU)
Work Experience: He works as Senior Relationship Manager in Standard Chartered Bank Nepal Ltd. He has worked for 14 years in the banking sector.
Mr. Rajan Kumar Amatya, Member
Qualification: Master of Commerce (M. Com) from Tribhuwan University (TU)
Work Experience: He works as a Deputy General Manager in Nepal Investment Bank Ltd. He has worked for over 34 years in the banking sector.
Mr. Kiran Kumar Shrestha, Member
Qualification: Master of Public Administration (MPA) from Tribhuwan University (TU)
Work Experience: He works as a Deputy General Manager in Nepal Bank Ltd. He has over 24 years of working experience in bank.
Mr. Anil Kumar Khanal, Member
Qualification: Master of Business Administration (MBA) from Tribhuwan University (TU)
Work Experience: He works as a Chief Risk Officer in Nabil Bank Limited.
Ms. Sadhana Upadhyay, Member
Qualification: Master of Business Administration (MBA) from Philippines
Work Experience: She has 30 years of work experience with the Nepal Rastra Bank.
Board of Directors (BOD) Representation as per Prospectus.
Management Team of Rural Microfinance Development Centre Ltd.
Mr. Shankar Man Shrestha, Chief Executive Officer
Qualification: Master of Arts (MA) in Economics from Tribhuwan University. He has also completed a Special Study in Agriculture Economics from Texas A. & M. University, USA.
Work Experience: He has served as Executive Director of CSD, an NGO, from August’91 to July’99. Before that, he worked in an Agriculture Development Bank of Nepal for 25 years holding positions such as Deputy General Manager, Director of Training, Chief of Loan Department, Regional Manager. In RMDC, he has been working as the Chief Executive Officer since August 1999.
Mr. Megh Raj Gajurel, (Senior Manager)
Qualification: Master of Public Administration (MPA) from Tribhuwan University (TU). He has also acquired numerous training related to Bank financial and management topics, from the prestigious organizations within and outside Nepal like CICTAB of India, ILO International Training Centre of Italy and others
Work Experience: He worked in Agriculture Development Bank Limited for 21 years and for the Nepal Credit and Commerce Bank (then Nepal Bank of Ceylon Ltd.) for more than 2 years. In RMDC, for a decade long he led the Microfinance Service Department and currently he is the chief of the Financial Management Department.
Mr. Tirtha Ratna Konajo, (Senior Manager)
Qualification: Master of Business Administration (MBA) from Tribhuwan University. He too has received various training related to Bank financial and management topics, from the prestigious organizations within and outside Nepal like NRB, Singapore based company Ernst and Young, USA based Booze Allen & Hamilton and others.
Work Experience: He worked in Nepal Bank Limited for 14.5 years and Himalayan Bank Ltd. for more than 3.5 years. In RMDC, he joined as a Manager in November 1999 then after he led the Financial Management Department and currently he is the chief of the Planning and Research Department in the organizations
Mr. Ram Dayal Rajbanshi, (Senior Manager)
Qualification: Masters of Arts (MBA) in International & Development Economics from the University of San Francisco, USA and Master of Science (M.Sc.) in Rural Regional Planning from AIT, Thailand.
Work Experience: He has worked with GTZ as an Economic Promotion Specialist for a poverty alleviation project for 20 months; with Deprosc as Project Managers for the Community-Based Economic Development Project, Dadeldhura and the Micro-credit Project, Morang for 20 months; with the Bank of Maldives Ltd., the Republic of Maldives as a UNV Specialist (Development Banking) for 2 years; with Agriculture Development Bank Limited as a Credit Officer for about 7 years; and with the Agriculture Extension and Research Project as an Agricuture Training Officer for 3 years.
In RMDC, he is currently the chief of the Microfinance Service Department. Prior to the current job, he led the Planning & Research Department of RMDC as a first chief of the newly established department.
Capital Structure
FINANCIAL HIGHLIGHT OF THE BANK
Figure in Rs “000”
In the initial established year, the bank had paid up to Rs 80 million but with the progress of time, the bank has revised its authorized, issued and paid up capital for numerous times. In 2061/01/11, it increased its issued capital to Rs 100 million then in 2062/10/04, it revised its authorized to Rs 320 million from 160 million and issued to Rs 250 million.
Similarly, coming to year 2063/08/05, it again changed its authorized to Rs 640 million and issued to Rs 320 million and by the year 2066/11/23, it again updated its authorized to Rs 1,000 million and increase its issued to Rs 520 million.
Coming to the second quarter of FY 2069/70, it's paid up was Rs 334 million but with the inclusion of Siddhartha Bank Limited and International Financial Centre, it's paid up currently stands at 70% up of the issued capital i.e. Rs Rs 364 million.
With the initial public offering (IPO), the company plans to par the capital structure with that of issuing capital of Rs 520 million. The company in its forecasted data till 2071/72 haven’t showed any alternation or increment in the capital. So, the chances of right or bonus share are minimized.
Having said that, as company’s authorized capital is Rs 1000 million and looking at the past history also, it has altered its capital so many times to grow and capture the market opportunities. So, in the near future also the possibility of such alteration is probably on the high side as a result the chances of right or bonus shares can’t be ruled out for the near future also.
Similarly, observing reserve and surplus of the past three years, it has been growing at a rate of more than 20%, suggesting that the bank has been able to well utilize its channel of various microfinance entities engaged in microfinance business in Nepal, helping the company in gradual growth.
The bank loan base is mainly focused on the wholesale lending to the Microfinance institutions (MFIs) like rural development banks, microfinance development banks, rural cooperatives and NGO financial intermediaries. Through the channel of these entities, the people of rural poor households get the access to micro finance.
As the company’s history in the field of microfinance goes way back, it has established relationship with various entities engaged in microfinance business (as in mid –Jan -2013 RMDC has 112 MFI partners of which 75 are active borrowers).
And given the Nepal situation of a large number of people under the low poverty line and low penetration of MFI activities in hilly areas, the bank has tapped into this opportunity which have attributed to the growth of the company’s loan portfolio by 28.14% and 16.58% in the fiscal year 2066/67 and 2067/68.
However, coming in the fiscal year 2068/69, its loan portfolio has decreased by 14.97%. The latest decline in RMDC loan portfolio is mainly caused by the commercial banks opting to bypass the channel of specialized agencies like RMDC and choosing to directly channel their deprived loan to the MFIs to gain more spread benefits.
Apart from the decline, one other drawback in the bank loan portfolio is that, its loan portfolio is highly concentrated on the top 20 borrowers only, as it accounts for 80% of the loan portfolio there.
Now as to the source of funding for the loan, the bank being a micro finance company, it doesn’t have the provision to accept deposits like other financial institutions do. The source of funding for the company’s lending purpose mainly comes in the form of loan from Asian Development Bank (ADB), Government of Nepal (GoN) and commercial banks/ financial institutions.
Currently, around 60% of its resources are in the form of low cost funds from ADB and GoN. In addition, remaining 40% resources are allocated from commercial banks/ financial institutions as a deprived sector loan.
Looking at the past three years report, the bank’s operating profit before provision is in the decline phase. Because of the bank’s failure to expand its loan portfolio, it’s growth in the interest income is in downside whereas its interest expenses obligation is on the increasing side attributing towards lower growth of net interest income.
In the last fiscal year, the bank interest income growth stood at only 17.37% to the prior growth of 32.39% whereas the interest expenses boosted up to 19.75% from 14.10%.
Looking at the net write back, the bank has made a negative write back in all the past three years respectively. But coming to the second quarter of this fiscal year, it has come to maintain a nil provision for bad debts and come to make a positive write back of Rs 4.13 million which indicates the company is in track of recovering the bad debts of previous years.
Likewise, if we look at the Net write back/ Loan figures also, we can see that the bank has in all the past three years exceeded over 0.50% provision. However, coming to the second quarter of this FY the company has been able to drastically decline its bad loans and maintain zero non performing Loan (NPL) suggesting a sound and healthy loan portfolio than before.
Now, if we look at the net profit figure, we will find that it is also in decreasing trend. Given the decreasing operating profit and increasing provision, the bank came to face such position. However, with the positive net write back in the second quarter of this fiscal year and NPL tallying to zero, the chances of declining scenario are less likely by the end of this fiscal year.
If we look at the Net Worth of the company, it has impressively grown to Rs 318.68 by the end of the previous fiscal year. The annualized second quarter data of the company show that its net worth stands at Rs 345.29 which is even higher than all the commercial banks.
Now, looking at the EPS, ROA and ROE, it has maintained a steady and remarkable growth. The second quarter figure of ROE indicates that the company returns rate is higher than the market interest rate and even higher than most of the commercial banks, which is also pointed out by its annualized EPS of Rs 46.95.
In conclusion, the bank has a strong management team and its owner consists of NRB along with 13 commercial banks and other financial institutions. So, in aspects of corporate governance there is less likely any chance of any fraudulent activities. The bank in itself is one of the pioneer institution in the area of micro finance in Nepal. With the engagement of more than a decade long in this field, the bank has well tapped into vast channels and opportunity provided by the Nepal’s economic, social and geographic scenario through the various MFIs, which provides a strong base for the expansion and diversification in the future.
Looking at the financial highlights, the lack of expansion in its loan portfolio has lowered its income growth but the decline in its provision for bad debt loan and NPL will surely let to a much stronger and healthy loan portfolio which will for sure lead to much sound organization than aggressive lending.
In spite of its low growth, RMDC still stands out better than most of the listed blue chip companies in the secondary market of Nepal. So, investing in the IPO of this company will surely turn out to be a very good investment opportunity.
Note: IPO applied for more than 50 units should be divisible by 10 and when applied for more than Rs 50,000 the payment should be made through account payee check.
Issue Manager: Ace Capital Limited
|
Initial Public Offering (IPO) Name |
Rural Microfinance Development Centre Ltd. |
|
Issued Units |
1.56 million |
|
Per Unit Cost (Face value + Premium) |
NPR (100+80) = NPR 180 |
|
IPO Size |
NPR 156 million |
|
Shares allotted for Staff |
31.2 thousand |
|
Size allotted for Staff |
NPR 3.12 million |
|
Shares allotted for Mutual Fund |
78 thousand |
|
Size allotted for Mutual Fund |
NPR 7.8 million |
|
Shares allotted to General Public |
1.4508 million |
|
Size allotted for General Public |
NPR 145.508 million |
|
Opening Date |
2070/03/27 |
|
Closing Date (Minimum) |
2070/03/31 |
|
Closing Date (Maximum) |
2070/04/10 |
|
Minimum Investment Units |
50 |
|
Minimum Investment Amount |
NPR 9,000 |
|
Maximum Investment Units |
0.1 million |
|
Maximum Investment Amount |
NPR 18 million |
|
ICRA Nepal Rating |
[ICRANP] IPO Grade 3+ |
Introduction of Rural Microfinance Development Centre Ltd.
Rural Microfinance Development Centre Ltd was established as a public company in 2056/08/20 B.S. under ‘Company Act, 1996’ with the mandate to operate as a wholesale lending organization within the framework of the then ‘Development Bank Act, 1995’.
Coming to the year 2064/09/30, the company again registered itself as a Class ‘D’ category financial institution licensed by Nepal Rastra Bank, which was incorporated under the Company Act. and licensed under the Bank and Financial Institutions Act (BAFIA) 2063.
The bank is promoted by institutional promoters Nepal Rastra Bank (NRB) - 6.58%, 13 Class A Commercial Banks - 90.57%, 5 Class D Microfinance Institution (MFI) - 2.42% and Deposit Insurance and Credit Guarantee Corporation (DICGC) - 0.43% .
The bank provides wholesale credit along with the institutional strengthening and capacity building supports to its partner MFIs with a view to promote and develop the microfinance sector in the country. The bank mainly focuses on reaching out to the largest number of the poor and disadvantaged households with appropriate microfinance services to enable them to realize their untapped potentials of development through the network of partner MFIs. Along with it, the bank also monitors and supervises client MFIs' activities to ascertain adherence to prudential and non prudential regulations.
Currently, RMDC is the largest wholesale lending organization for MFIs in the country as its outreach shares nearly four-fifth of the entire microfinance industry’s business in the country.
The Bank has been registered with authorized capital of NPR 1,000 million and currently holds issued capital of NPR 520 million and paid up capital of NPR 364 million. Until the last fiscal year the bank paid up stood at Rs 320 Million but with the injection of NRs 14 million (with premium of NRs 25.48 million) and NRs 30 million (with premium of NRs 24 million) by Siddhartha Bank Ltd and International Finance Corporation respectively in this fiscal year, the bank’s paid up capital came to stand at Rs 364 million.
The Bank is firmly motivated to emerge as a financially viable, operationally sustainable and professionally efficient apex institution of microfinance in Nepal.
The bank registered office is situated at ward no 31, Putalisadak, Kathmandu, Nepal, which is also the central office of the Bank. The bank can serve in all the 75 districts of Nepal.
Major shareholders in Rural Microfinance Development Centre Ltd. as per the Prospects and Annual Report 2068/69
|
Shareholder’s Name |
Units |
In % |
|
Nepal Rastra Bank |
210,450
|
5.78
|
|
Nepal Investment Bank Limited |
338,100
|
9.29
|
|
Nabil Bank Limited |
507,200
|
13.93
|
|
Nepal Bank Limited |
293,550
|
8.06
|
|
Standard Chartered Bank Limited |
521,900
|
14.34
|
|
Nepal SBI Bank Limited |
188,950
|
5.19
|
|
Himalayan Bank Limited |
480,000
|
13.19
|
|
Nepal Industrial and Commercial Bank Limited |
252,310
|
6.93
|
|
International Financial Centre |
300,000
|
8.24
|
|
Siddhartha Bank Limited |
140,000
|
3.85
|
Other Shareholders of the Company
|
Shareholder’s Name |
Units |
In % |
|
Rastriya Banijya Bank |
82,950
|
2.28
|
|
Nepal Credit & Commerce Bank Ltd. |
70,750
|
1.94
|
|
Bank of Kathmandu |
70,750
|
1.94
|
|
Nepal Bangladesh Bank Ltd. |
45,310
|
1.24
|
|
Everest Bank Ltd. |
31,200
|
0.86
|
|
Lumbini Bank Ltd. |
15,340
|
0.42
|
|
Purbanchal Grameen Bikash Bank Ltd. |
8,000
|
0.22
|
|
Sudurpaschimanchal Grameen Bikash Bank Ltd. |
8,000
|
0.22
|
|
Madhyapaschimanchal Grameen Bikash Bank Ltd. |
11,540
|
0.32
|
|
Paschimanchal Grameen Bikash Bank Ltd. |
29,000
|
0.80
|
|
Madhyamanchal Grameen Bikash Bank Ltd. |
10,000
|
0.27
|
|
Deposit & Credit Guarantee Corporation |
13,700
|
0.38
|
|
Nirdhan Utthan Bank Ltd. |
11,000
|
0.30
|
Board of Directors of Rural Microfinance Development Centre Ltd.
Mr. Ashok SJB Rana, Chairman
Qualification: Bachelor Degree in Economics from the George Mason University, Fairfax V.A. USA.
Work Experience: He is the Chief Executive Officer of Himalayan Bank Limited and President of the Nepal Banker’s Association. He has over 20 years of work experience in commercial banking.
Mr. Ramjee Regmi, Member
Qualification: Masters of Arts (MA) in Economics and Master of Public Administration (MPA) in Human Resource from Tribhuwan University (TU).
Work Experience: He works in Nepal Rastra Bank (NRB) as an Executive Director of the Financial Management Department. He has worked for 28 years with the Nepal Rastra Bank.
Mr. Anil K Shrestha, Member
Qualification: Master of Business Administration (MBA) from Tribhuwan University (TU)
Work Experience: He works as Senior Relationship Manager in Standard Chartered Bank Nepal Ltd. He has worked for 14 years in the banking sector.
Mr. Rajan Kumar Amatya, Member
Qualification: Master of Commerce (M. Com) from Tribhuwan University (TU)
Work Experience: He works as a Deputy General Manager in Nepal Investment Bank Ltd. He has worked for over 34 years in the banking sector.
Mr. Kiran Kumar Shrestha, Member
Qualification: Master of Public Administration (MPA) from Tribhuwan University (TU)
Work Experience: He works as a Deputy General Manager in Nepal Bank Ltd. He has over 24 years of working experience in bank.
Mr. Anil Kumar Khanal, Member
Qualification: Master of Business Administration (MBA) from Tribhuwan University (TU)
Work Experience: He works as a Chief Risk Officer in Nabil Bank Limited.
Ms. Sadhana Upadhyay, Member
Qualification: Master of Business Administration (MBA) from Philippines
Work Experience: She has 30 years of work experience with the Nepal Rastra Bank.
Board of Directors (BOD) Representation as per Prospectus.
|
Shareholder’s Name |
Representation From
|
Share units
|
|
Mr. Ashok SJB Rana |
HBL
|
480,000
|
|
Mr. Ramjee Regmi |
NRB
|
210,450
|
|
Mr. Anil K Shrestha |
SCB
|
521,900
|
|
Mr. Rajan Kumar Amatya |
NIB
|
338,100
|
|
Mr. Kiran Kumar Shrestha |
NBL
|
293,550
|
|
Mr. Anil Kumar Khanal |
NABIL
|
507,200
|
|
Ms. Sadhana Upadhyay |
Independent
|
-
|
Management Team of Rural Microfinance Development Centre Ltd.
Mr. Shankar Man Shrestha, Chief Executive Officer
Qualification: Master of Arts (MA) in Economics from Tribhuwan University. He has also completed a Special Study in Agriculture Economics from Texas A. & M. University, USA.
Work Experience: He has served as Executive Director of CSD, an NGO, from August’91 to July’99. Before that, he worked in an Agriculture Development Bank of Nepal for 25 years holding positions such as Deputy General Manager, Director of Training, Chief of Loan Department, Regional Manager. In RMDC, he has been working as the Chief Executive Officer since August 1999.
Mr. Megh Raj Gajurel, (Senior Manager)
Qualification: Master of Public Administration (MPA) from Tribhuwan University (TU). He has also acquired numerous training related to Bank financial and management topics, from the prestigious organizations within and outside Nepal like CICTAB of India, ILO International Training Centre of Italy and others
Work Experience: He worked in Agriculture Development Bank Limited for 21 years and for the Nepal Credit and Commerce Bank (then Nepal Bank of Ceylon Ltd.) for more than 2 years. In RMDC, for a decade long he led the Microfinance Service Department and currently he is the chief of the Financial Management Department.
Mr. Tirtha Ratna Konajo, (Senior Manager)
Qualification: Master of Business Administration (MBA) from Tribhuwan University. He too has received various training related to Bank financial and management topics, from the prestigious organizations within and outside Nepal like NRB, Singapore based company Ernst and Young, USA based Booze Allen & Hamilton and others.
Work Experience: He worked in Nepal Bank Limited for 14.5 years and Himalayan Bank Ltd. for more than 3.5 years. In RMDC, he joined as a Manager in November 1999 then after he led the Financial Management Department and currently he is the chief of the Planning and Research Department in the organizations
Mr. Ram Dayal Rajbanshi, (Senior Manager)
Qualification: Masters of Arts (MBA) in International & Development Economics from the University of San Francisco, USA and Master of Science (M.Sc.) in Rural Regional Planning from AIT, Thailand.
Work Experience: He has worked with GTZ as an Economic Promotion Specialist for a poverty alleviation project for 20 months; with Deprosc as Project Managers for the Community-Based Economic Development Project, Dadeldhura and the Micro-credit Project, Morang for 20 months; with the Bank of Maldives Ltd., the Republic of Maldives as a UNV Specialist (Development Banking) for 2 years; with Agriculture Development Bank Limited as a Credit Officer for about 7 years; and with the Agriculture Extension and Research Project as an Agricuture Training Officer for 3 years.
In RMDC, he is currently the chief of the Microfinance Service Department. Prior to the current job, he led the Planning & Research Department of RMDC as a first chief of the newly established department.
Capital Structure
|
Authorized Capital |
NPR 1,000.00 Million
|
|
Issued Capital |
NPR 520.00 Million
|
|
Paid up Capital (Promoters) |
NPR 364.00 Million
|
FINANCIAL HIGHLIGHT OF THE BANK
Figure in Rs “000”
|
Company |
FY
2066/67
|
FY
2067/68
|
FY
2068/69
|
FY 2069/70
Second quarter
|
|
Paid up Capital |
320,000
|
320,000
|
320,000
|
334,000
|
|
Reserve and Surplus |
442,450
|
565,269
|
699,789
|
819,277
|
In the initial established year, the bank had paid up to Rs 80 million but with the progress of time, the bank has revised its authorized, issued and paid up capital for numerous times. In 2061/01/11, it increased its issued capital to Rs 100 million then in 2062/10/04, it revised its authorized to Rs 320 million from 160 million and issued to Rs 250 million.
Similarly, coming to year 2063/08/05, it again changed its authorized to Rs 640 million and issued to Rs 320 million and by the year 2066/11/23, it again updated its authorized to Rs 1,000 million and increase its issued to Rs 520 million.
Coming to the second quarter of FY 2069/70, it's paid up was Rs 334 million but with the inclusion of Siddhartha Bank Limited and International Financial Centre, it's paid up currently stands at 70% up of the issued capital i.e. Rs Rs 364 million.
With the initial public offering (IPO), the company plans to par the capital structure with that of issuing capital of Rs 520 million. The company in its forecasted data till 2071/72 haven’t showed any alternation or increment in the capital. So, the chances of right or bonus share are minimized.
Having said that, as company’s authorized capital is Rs 1000 million and looking at the past history also, it has altered its capital so many times to grow and capture the market opportunities. So, in the near future also the possibility of such alteration is probably on the high side as a result the chances of right or bonus shares can’t be ruled out for the near future also.
Similarly, observing reserve and surplus of the past three years, it has been growing at a rate of more than 20%, suggesting that the bank has been able to well utilize its channel of various microfinance entities engaged in microfinance business in Nepal, helping the company in gradual growth.
|
Years |
FY
2066/67
|
FY
2067/68
|
FY
2068/69
|
FY 2069/70
Second quarter
|
|
Loan and Advances (In Rs ‘000’) |
1,845,310
|
2,151,263
|
1,829,257
|
1,730,105
|
|
Growth in Loan and Advances (%) |
28.14%
|
16.58%
|
-14.97%
|
-
|
The bank loan base is mainly focused on the wholesale lending to the Microfinance institutions (MFIs) like rural development banks, microfinance development banks, rural cooperatives and NGO financial intermediaries. Through the channel of these entities, the people of rural poor households get the access to micro finance.
As the company’s history in the field of microfinance goes way back, it has established relationship with various entities engaged in microfinance business (as in mid –Jan -2013 RMDC has 112 MFI partners of which 75 are active borrowers).
And given the Nepal situation of a large number of people under the low poverty line and low penetration of MFI activities in hilly areas, the bank has tapped into this opportunity which have attributed to the growth of the company’s loan portfolio by 28.14% and 16.58% in the fiscal year 2066/67 and 2067/68.
However, coming in the fiscal year 2068/69, its loan portfolio has decreased by 14.97%. The latest decline in RMDC loan portfolio is mainly caused by the commercial banks opting to bypass the channel of specialized agencies like RMDC and choosing to directly channel their deprived loan to the MFIs to gain more spread benefits.
Apart from the decline, one other drawback in the bank loan portfolio is that, its loan portfolio is highly concentrated on the top 20 borrowers only, as it accounts for 80% of the loan portfolio there.
Now as to the source of funding for the loan, the bank being a micro finance company, it doesn’t have the provision to accept deposits like other financial institutions do. The source of funding for the company’s lending purpose mainly comes in the form of loan from Asian Development Bank (ADB), Government of Nepal (GoN) and commercial banks/ financial institutions.
Currently, around 60% of its resources are in the form of low cost funds from ADB and GoN. In addition, remaining 40% resources are allocated from commercial banks/ financial institutions as a deprived sector loan.
|
Years |
FY
2066/67
|
FY
2067/68
|
FY
2068/69
|
FY 2069/70
Second quarter
|
|
Operating Profit before provision (In Rs ‘000’) |
157,081
|
208,934
|
246,243
|
119,084
|
|
Growth in Operating Profit Before Provision (%) |
52.81%
|
33.01%
|
17.86%
|
-
|
|
Net write back (In Rs ‘000’) |
-16884
|
-12748
|
-32166
|
4131
|
|
Net write back/loan |
-0.91%
|
-0.59%
|
-1.76%
|
0.24%
|
|
Net profit (In Rs ‘000’) |
89,190
|
124,819
|
136,520
|
78,410
|
|
Growth in Net Profit (%) |
46.29%
|
39.95%
|
9.37%
|
-
|
Looking at the past three years report, the bank’s operating profit before provision is in the decline phase. Because of the bank’s failure to expand its loan portfolio, it’s growth in the interest income is in downside whereas its interest expenses obligation is on the increasing side attributing towards lower growth of net interest income.
In the last fiscal year, the bank interest income growth stood at only 17.37% to the prior growth of 32.39% whereas the interest expenses boosted up to 19.75% from 14.10%.
Looking at the net write back, the bank has made a negative write back in all the past three years respectively. But coming to the second quarter of this fiscal year, it has come to maintain a nil provision for bad debts and come to make a positive write back of Rs 4.13 million which indicates the company is in track of recovering the bad debts of previous years.
Likewise, if we look at the Net write back/ Loan figures also, we can see that the bank has in all the past three years exceeded over 0.50% provision. However, coming to the second quarter of this FY the company has been able to drastically decline its bad loans and maintain zero non performing Loan (NPL) suggesting a sound and healthy loan portfolio than before.
Now, if we look at the net profit figure, we will find that it is also in decreasing trend. Given the decreasing operating profit and increasing provision, the bank came to face such position. However, with the positive net write back in the second quarter of this fiscal year and NPL tallying to zero, the chances of declining scenario are less likely by the end of this fiscal year.
|
Years |
FY
2066/67
|
FY
2067/68
|
FY
2068/69
|
FY 2069/70
Second quarter
|
|
Net Worth (Rs.) |
238.27
|
276.65
|
318.68
|
345.29
|
|
Annualized EPS (Rs.) |
27.87
|
39.01
|
42.66
|
46.95
|
|
Annualized ROA |
2.89%
|
3.79%
|
3.64%
|
3.87%
|
|
Annualized ROE |
11.70%
|
14.10%
|
13.39%
|
13.60%
|
If we look at the Net Worth of the company, it has impressively grown to Rs 318.68 by the end of the previous fiscal year. The annualized second quarter data of the company show that its net worth stands at Rs 345.29 which is even higher than all the commercial banks.
Now, looking at the EPS, ROA and ROE, it has maintained a steady and remarkable growth. The second quarter figure of ROE indicates that the company returns rate is higher than the market interest rate and even higher than most of the commercial banks, which is also pointed out by its annualized EPS of Rs 46.95.
In conclusion, the bank has a strong management team and its owner consists of NRB along with 13 commercial banks and other financial institutions. So, in aspects of corporate governance there is less likely any chance of any fraudulent activities. The bank in itself is one of the pioneer institution in the area of micro finance in Nepal. With the engagement of more than a decade long in this field, the bank has well tapped into vast channels and opportunity provided by the Nepal’s economic, social and geographic scenario through the various MFIs, which provides a strong base for the expansion and diversification in the future.
Looking at the financial highlights, the lack of expansion in its loan portfolio has lowered its income growth but the decline in its provision for bad debt loan and NPL will surely let to a much stronger and healthy loan portfolio which will for sure lead to much sound organization than aggressive lending.
In spite of its low growth, RMDC still stands out better than most of the listed blue chip companies in the secondary market of Nepal. So, investing in the IPO of this company will surely turn out to be a very good investment opportunity.
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