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Udhyam Bikash Bank annouces IPO from 13th Dec 2009

Published by Octron on December 5, 2009

The marathon of Development Bank IPO doesn’t seem to end very soon. After 5 IPOs in November (4 of them were Development Banks) and Resunga Dev. Bank on Dec 01, 2009 yet another development bank has published an announcement notice for its IPO release starting from 13th Dec 2009 (28.08.2066). Udhyam Bikash Bank is issuing 150,000 units shares to pubic at face value of Rs. 100/share. Our of 1,50,000 units, 3,000 units of shares has been reserved for the bank employees. The issue manager for the IPO is NIDC Capital Markets, Kamal Pokhari, Kathmandu. Applicants can apply for minimum 50 units and maximum 10,000 units of shares. The earliest closing date for submission of application will be 01.09.2066.

Udhyam Bikash Bank is licensed as class ‘B’ financial institution by the central bank (NRB) under Company Act 2063. It has registered central office in Chitwan District, Narayangadh (Bharatpur). The company has 51 promoters, our of them Mr. Suresh Chandra Poudel (Dhapasi, Kathmandu) holds highest 37,500 unit of shares followed by Mr. Satish Bastola (Pokhara) holding 20,000 units of shares. On the management side, Dr. Sunil Maskey (Phd.), an ICT consultant is holding the president position (2,000 units of shares), while Mr. Sanjeeb Pradhan who has been working in financial institutions since 2053 B.S. is the current CEO of the company. He also holds 10,000 units of share in the company.

Capital Structure:

Promoter Shares: 3,50,000 units of shares (70%)

General Shares: 1,50,000 units of shares (30%)

Total: 5,00,000 units of shares (worth: Rs. 5 Crore)

Financials:

Since its operation in 2063 B.S., the bank has been making profit only from FY 064/65. In FY 065/66, the bank made profit of Rs. 74,81,000 (Un-audited). Strangely enough after this IPO release, the company has forecasted its profit will come down to just Rs. 19,42,000 in FY 066/67. If you look into its profit and loss statement [click here to see], you can clearly see the reason for such drastic downfall. It will be spending Rs. 21,087,000 (in FY 066/67) compared to Rs. 14,946,000 (FY 065/66), while its interest income is forecasted to rise only to Rs. 19,138,000 (FY 066/67) from Rs. 18,948,000 (FY 065/66). The EPS will also be decreasing from Rs. 21(FY 065/66) to Rs. 3.30 (FY 066/67) after release of IPO, due to decrement in the profit and increment in the number of shareholders.

Some of the reasons for such scenario might be as follows;

The bank seems to be expanding its network through branches around Pokhara, Kaski, Chitwan)
The bank will have huge surplus deposits, for which the bank will be paying off more in interest than its income interest from loan.
Or the bank might have some outstanding debts to clear off which is not shown in the profit and loss statement.

Reference:

Financial Statements
Announcement Notice (Courtesy: Jamb)

Verdict: We advise all the investors to check the financial statements published along the announcement letter properly before jumping into this IPO wagon. With recent flooding of IPOs, this development bank doesn’t have not a single thing that could stand out compared to other IPOs. Its normal run-of-the-mill kind of bank, nothing special. Looking its forecasted profit and loss statement, only thing this bank might be giving out in the future will be right shares. Even Rs. 2 Dividend per annum seems to be difficult for this bank in coming years.

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