MICROCAPITAL BRIEF: International Finance Corporation (IFC), Siddhartha Bank Limited (SBL) Purchase 440k Shares of Rural Microfinance Development Center (RMDC) of Nepal Via Initial Public Offering (IPO)

The International Finance Corporation (IFC), a member of the US-based World Bank Group, recently purchased 300,000 shares at NPR 180 (USD 1.87) per unit from an initial public offering (IPO) by the Rural Microfinance Development Center (RMDC), a Nepal-based wholesale microcredit lender. Additionally, Siddhartha Bank Limited (SBL), a Nepal-based financial services provider, purchased 140,000 shares at various rates of up to NPR 315 (USD 3.27) per unit from the IPO. The IPO, which lasted from July 11 to July 15, 2013, involved a total of 1.56 million units of primary shares at a premium rate of NPR 100 (USD 1.04) per unit. The general public was able to subscribe to 1.45 million of those shares at the premium rate, while 31,200 shares and 78,000 shares were allocated for RMDC employees and mutual funds, respectively. The premium rate, which offered a discount of NPR 80 (USD 0.77) per share, would normally have had a nominal value of NPR 180 (USD 1.87) per share [1].

Ace Capital Limited (ACL), a Nepal-based merchant bank and subsidiary of Ace Development Bank Limited, a Nepal-based financial services provider, managed the IPO. The Nepal subsidiary of the Indian Credit Rating Agency (ICRA Nepal), Nepal’s main credit rating agency, assigned the IPO a rating of Grade 3+, indicating that the IPO had “average fundamentals. [1]” ICRA Nepal assigns IPO grading on a scale of Grade 1 through Grade 5, with the former indicating strong fundamentals and the latter indicating poor fundamentals. The rating was given to RMDC because of its track record in microfinance activities, relationships with various entities in the microfinance industry in Nepal, strong institutional promoters and management team, low funding cost and adequate loan underwriting and monitoring process [2].

At fiscal year-end 2012, IFC reported 184 member countries, total assets of USD 76 billion and return on equity of approximately 5 percent. In the year 2011, SBL had total assets of NPR 24.4 billion (USD 294 million), a gross loan portfolio of NPR 18.6 billion (USD 223 million), deposits of NPR 21.6 billion (USD 259 million), return on assets (ROA) of 1.24 percent, return on equity (ROE) of 13.5 percent and operations in 43 branches across Nepal. The number of depositors is unavailable. As of July 2011, RMDC reported outstanding loans of NPR 2.24 billion (USD 25.3 million) disbursed to 95 partner organizations and ROA of four percent.

By Michael Averell, Research Associate

About International Finance Corporation (IFC)

A member of the US-based World Bank Group, the International Finance Corporation (IFC) offers loans, equity investments, advisory services and technical assistance to private companies with the intent of alleviating poverty and promoting open and competitive markets in developing countries. At fiscal year-end 2012, IFC reported 184 member countries, total assets of USD 76 billion and return on equity of approximately 5 percent.

About Siddhartha Bank Limited (SBL)

Established in 2002, Siddhartha Bank Limited (SBL) is a Nepal-based financial services provider that offers internet banking, mobile banking, branchless banking, ATM and cards (debit, credit, pre-paid) services. In the year 2011, SBL had total assets of NPR 24.4 billion (USD 294 million), gross loan portfolio of NPR 18.6 billion (USD 223 million), deposits of NPR 21.6 billion (USD 259 million), return on assets (ROA) of 1.24 percent, return on equity (ROE) of 13.5 percent and operations in 43 branches across Nepal.

About Rural Microfinance Development Center (RMDC)

The Rural Microfinance Development Center Limited (RMDC) is a Nepal-based wholesale lender to microfinance institutions (MFIs) and institutions that support MFIs. In addition, RMDC imparts training and other support to MFIs. RMDC was founded in 1998 as a public limited company. Its promoters and shareholders include 13 commercial banks; five regional rural development banks; the Deposit Insurance and Credit Guarantee Corporation of Nepal; Nirdhan Utthan Bank Limited, a microfinance bank; and the Nepal Rastra Bank (NRB), the Nepalese central bank. As of July 2011, RMDC reported outstanding loans of NPR 2.24 billion (USD 25.3 million) disbursed to 95 partner organizations and return on assets (ROA) of four percent. RMDC has set a goal of reaching approximately 1.5 million families in 75 districts of Nepal with microfinance services through 150 partner organizations by the end of 2015.

About Ace Capital Limited (ACL)

Ace Capital Limited (ACL) is a Nepal-based merchant bank and subsidiary of Ace Development Bank Limited, a Nepal-based financial services provider. ACL provides services in issue management, underwriting and portfolio management. Financial information for ACL is unavailable. In the year 2010, Ace Development Bank Limited had total assets of NPR 7.0 billion (USD 95.6 billion), gross loan portfolio of NPR 3.28 billion (USD 44.8 billion), deposits of NPR 4 billion (USD 54.6 billion), return on assets (ROA) of 1.15 percent and return on equity (ROE) of 10.6 percent.

Sources and Additional Resources

[1] The Himalayan Times: “RMDC to launch IPO at premium rate,” http://www.thehimalayantimes.com/fullNews.php?headline=RMDC+to+launch+IPO+at+premium+rate&NewsID=382533

[2] ICRA Nepal: “Rating of Rural Microfinance Development Centre Limited,” http://icranepal.com/RecentReleases/REVIEWED%20R%20RMDC%20-%20156%20M%20IPO%206.17.13.pdf

MicroCapital story, February 28, 2013, “MICROCAPITAL BRIEF: Nepal Rastra Bank, Rural Microfinance Development Center, Center for Microfinance Urge Microlenders to Lower Interest Rates, Focus on “Deprived” Sectors,” http://www.microcapital.org/microcapital-brief-nepal-rastra-bank-rural-microfinance-development-center-center-for-microfinance-nepal-urge-microlenders-to-lower-interest-rates-focus-on-deprived-sectors/

MicroCapital story, January 25, 2013, “MICROCAPITAL BRIEF: Representatives of Nepa’s Rural Microfinance Development Center (RMDC), Nepal Rastra Bank (NRB) Express Cautious Optimism About Microfinance Reducing Poverty While Conceding There Are High Interest Rates, Mission Drift,” http://www.microcapital.org/microcapital-brief-representatives-of-nepals-rural-microfinance-development-center-rmdc-nepal-rastra-bank-nrb-express-cautious-optimism-about-microfinance-reducing-poverty-while-concedi/

MicroCapital story, July 16, 2013, “MICROCAPITAL BRIEF: International Finance Corporation (IFC) Loans $1m to Bancosol of Bolivia to Support Rural Areas,” http://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-loans-1m-to-bancosol-of-bolivia-to-support-rural-areas/

MicroCapital story, July 1, 2013, “MICROCAPITAL BRIEF: International Finance Corporation (IFC) Loans $4m to FINCA Georgia to Support Micro- and Small Businesses, Entrepreneurs,” http://www.microcapital.org/microcapital-brief-international-finance-corporation-ifc-loans-4m-to-finca-georgia-to-support-micro-and-small-businesses-entrepreneurs/

MicroCapital Universe Profile: International Finance Corporation (IFC) http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=International+Finance+Corporation+%28IFC%29#Description_

MicroCapital Universe Profile: Siddhartha Bank Limited (SBL) http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Siddhartha+Bank+Limited+%28SBL%29

MicroCapital Universe Profile: Rural Microfinance Development Center (RMDC) http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Rural+Microfinance+Development+Center+Ltd.+%28RMDC%29

MicroCapital Universe Profile: Ace Capital Limited (ACL) http://www.microcapital.org/microfinanceuniverse/tiki-index.php?page=Ace+Capital+Limited+%28ACL%29

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