Resunga Bikash Bank IPO from 01 Dec 2009

After 5 IPOs release last month the trend is still going on with the release of IPOs this month too. On Dec 01, 2009 Resunga Bikas Bank hit the marquee with release of 91,800 unit of shares to general investors including 1,836 units to its employees at the face value of Rs. 100 per share [annoucement letter]. Despite disastrous secondary market condition, the primary market still seems to be booming. At least that’s what the oversubscription of recent IPO releases reflect. Still the basic question remains unanswered, is our market big enough for such large volume of shares released every month from IPOs, Right Shares, Bonus Share and convertible promoter shares? [ read Ice Age: Are We There Yet ?]One of the reason why stock market is getting depressing day by day is the huge overflow of recent IPO shares from A, B and C banks, finance companies which you have never heard of. Where will all these shares end up one day?
Will the primary share investor ever find buyer in the secondary market or will they be content with 5-10% cash dividend every year?
Anyway, instead of getting into long debate upon the future of the NEPSE (which stands at 522 points on 01 Dec 2009), lets focus upon Resungs Bikas Bank IPO and its technicalities.
Resunga Bikash Bank is issuing its IPO from 1st December 2009 till 6th December 2009. The minimum number of shares to be applied is 50 where 5000 units is the maximum limitation. Civil Capital Market Ltd., Kamaladi, Kathmandu (Kathmandu Plaza, 3 Floor) has been appointed as the Issue Manager for this IPO.
Resunga Bikas Bank Limited is licensed as “B” Class Financial Institution by NRB with registered central office at Gulmi, Lumbini. Its major area of operation is in Gulmi itself. The announcement notice claims to have branches in Gulmi only but yet not in the capital or any other major cities in Nepal.

Capital Structure and Ownership Composition after Allotment:
Authorized Capital: Rs.5,00,00,000
Promoter Shares: Rs. 2,14,20,000 (70%)
Public Shares: Rs. 91,80,000 (30%)
IPO Date:
Opening Date: 1st December 2009 (2066 Mangsir16)
Closing Date: 6th December 2009 (2066 Mangsir 21) (Sooner) , 15th December 2009 (2066 Mangsir 30) (Later)

Financials

Particulars	2064/65	2065/66	2066/67*	2067/68*	2068/69*
Paid Up Capital	2,14,20,000	2,14,20,000	30600000	30600000	30600000
Reserve & Surplus	48000	4266000	6564000	12311000	20761
No. of Shares	214200	214200	306000	306000	306000
Net Profit ('000)	76	6635	6044	8907	11510
EPS	0.47	19.69	19.75	29.11	37.61

Note: * Projected Figures

As per the promoters are concerned, out of 18 promoters, 16 holds 11,900 units of shares and are mostly from Tamghans, Gulmi district. On the management side, its strange to see only President Mr. Rajendra Prashad Shrestha having some experience in Banking sector (worked in NRB for some years, what kind of work and designation, not mentioned ?). Other members in the management team are from textile, readymade clothing store, stationary store, food store.
Verdict: Though, the bank seems to be painting shiny picture in the future, the bank seems nothing larger than current cooperatives in the valley. The lack of branches in the major city centers, management team’s work background clearly depicts bank’s current limitation to serve remote and underdeveloped regions of the Nepal. Also, its profit margin will be restricted to development of those regions only. As the share units are very limited, there is heavy chance of huge oversubscription by native Gulmi residents only.
To conclude we can say, you can take pass upon this bank IPO. If you have huge stack of cash sitting idle in low interest yielding bank, then you can invest SOME (not much) into this IPO else better give it a miss. Resunga is not worth the hassle, cash freezing and 20% IPO allotment result

Source:Nepseguide.com