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City Development Bank to issue IPO from Feb 02, 2010

Published by Octron on January 25, 2010

New year, new IPOs. After Sewa Bikas Bank, City Development Bank will be releasing IPO for 6,00,000 units of shares from 2nd Feb 2010 (19.10.2066) till 5th Feb 2010 (22.10.2066) earliest. The minimum quantity of shares that you can apply is 50 units and maximum is 25,000 units. Ace development bank, Narayanchaur, Kathmandu has be appointed as the issue manager for this IPO.

City Development Bank is registered as class ‘B’ financial institution with registered headquater at Chipledunga, Pokhara 4, Kaski. The bank’s major operation area is in Pokhara. Currently, it has four branches three in Kaski and one in Lamjung.

Capital Structure:

Authorized Capital: Rs. 40,00,00,000

Issued Capital: Rs. 20,00,00,000

Paid-up Capital: Rs. 20,00,00,000

Out of 20 Cr. paid-up capital, promoters will be holding 70% shares (14 Cr. worth) and 30% (6 Cr. worth) will be issued in this IPO. As published in IPO annoucement notice, there are only six major promoters of the bank who currently holds ard. only 2.6 Cr. worth of shares as opposed to required 14 Cr. worth of shares. The promoters consists one ex-NRB officer, another Deep industries group propriter and others from diverse fields. Though the bank claims to have various branches in Pokhara, it has listed very few from the management team; Bishwo Mohan Adhikary (CEO), Padma Bahadur GC (Loan Manager), Madhav Prashad Adhikary. All three of them are said to have many years of previous work experience in financial institutions.

Looking over financial statement published along the IPO annoucement letter, the bank made more than 6 times profit in FY 065/66 compared to FY 064/65. Likewise shareholders also increased from 0.7 million units to 1.4 million units within one year, resulting EPS growth from Rs. 2.03 to Rs. 7.73. Checking its forecasted profit and loss statement, the bank clearly doesn’t seem to be planning of increasing its shareholder through bonus/right shares till FY 068/69 with EPS reaching till Rs. 19.09 by FY 068/69.

Verdict: The way secondary market and NEPSE is faring, there is very little hope for making good return even from IPOs. The supply of newly listed shares, right shares and bonus shares are already flooding in the market without any buyers. Checking the details publishied in the annoucement letter, City Development Bank IPO does not seem the most promising deal for the investors.

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