1.Introduction:
Name: Janata Bank Nepal Limited
Business: Banking
Date of operation: 04.05.2010
C.E.O: Mr. Bijay Pant
Chairman: Udaya Nepali Shrestha
No. Of Branches(Including H.O): 23
No. Of ATMs: 10
Head Office: Shankhamul Marg, New Baneshwor, Kathmandu
2.Ownership Pattern:
Domestic Ownership: 100%
Other entities: 3.57%
Others: 96
Foreign Ownership: -
NOTE: The pattern of ownership is based upon latest published annual report.
3.List of Prominent Shareholders:
Shareholders Shareholding in %
Arun Valley Hydropower 2.86
Guru Prasad Neupane 1.63
Jeeven Raj shakya 1.57
Dharma Dhoj Parajuli 1.49
Nabin Jyoti Tuladher 1.43
Satish Neupane 1.28
Ramchandra shah 1.26
Kiran Man Joshi 1.22
Jip Tchering Lama 1.07
Subharatna Shakya 1.07
Nirmal Jyoti Tuladher 1.01
Ganga Shrestha 0.86
Sailendra Guragain 0.84
5.Performance Highlights:
Particulars F/Y 2066/67 F/Y 2067/68 F/Y 2068/69(9 Months)
Total Assets ('000) 2,337,869 5,110,326 8,845,820
YOY Increase in total Assets (%) - 118.59 73.10
Total Deposit ('000) 855,362 3,501,603 6,887,220
YOY Increase in total deposit (%) - 309.37 96.69
Total loan and Advances ('000) 602,247 3,541,266 6,600,675
YOY Increase in total Lending (%) 488.01 86.39
Investment ('000) 75,000 542,029 1,031,328
Net profit ('000) 9,631 30,708 43,783
Non performing Credit/Total Credit (%) - - 0.03
Weighted average interest rate spread (%) 3.24 2.48 2.37
No. of shares(No. in '000) 14,000 14,000 14,000
No. of employees(No.) 93 156 -
6. Critical Analysis:
1. Janata Bank Nepal Limited is the 27th Commercial Bank of Nepal. Promoted by 836 promoters, Janata Bank shall be the first in its kind to have an initial paid up capital of NPR 2 Billion immediately after IPO.
2. Major promoters Of the Bank:
The bank has been promoted by the group of persons running Arun Valley hydropower and other associate companies along with Arun Valley Hydropower. One of the key personel behind operation of this bank is Guru Prasad Neupane and other Neupane families.
Promoters Janata Bank Sahreholding % Promoters Arun Valley H.P Sahreholding %
Arun Valley Hydropower 2.86 Guru Prasad Neupane 6.48%
Guru Prasad Neupane 1.63 Satish Neupane 3.97%
Jeeven Raj shakya 1.57 Ramesh Prasad Neupane 1.17%
Dharma Dhoj Parajuli 1.49 Sumitra Devi Neupane 3.67%
Nabin Jyoti Tuladher 1.43 Jeevan Raj Shakya 6.02%
Satish Neupane 1.28 Amarraja Tamrakar 5.25%
Ramchandra shah 1.26 Sailendra Guragain 4.20%
Kiran Man Joshi 1.22 Krishna Prasad paudel 3.79%
Jip Tchering Lama 1.07 Bhusan Guragain 2.33%
Subharatna Shakya 1.07 Saurav Guragain 2.33%
Nirmal Jyoti Tuladher 1.01
Ganga Shrestha 0.86
Sailendra Guragain 0.84
3. The key Promoters especially Mr. Guru prasad Neupane (director) and Mr. Udaya Nepali Shrestha (Chairman) has very good exposure in banking sector and possess sound knowledge and qualifications required to run any bank professionally or even to excel the other competitors. Taking into consideration their past exposure and long experience in the similar field, the general investors and even the depositors might remain a bit confided over the future success of the bank.
Short Profile of Mr. Shrestha and Mr. Neupane:
Mr. Udaya Nepali Shrestha (Chairman)
Mr. Shrestha holds an M.Com, M.A (Eco.), P.G.D (International Law), LLB degree from different national and international universities.
Prior to attending the board of Janata Bank as Chairman, Mr. Shrestha has served in the capacity of Chairman of Board of Directors in Nepal Investment Bank Ltd., Nepal SBI Bank Ltd. He has also served as director in Tourism Development Bank Ltd., Rastriya Banijya Bank Ltd. and Nepal Telecommunications Corporation. He held the position of Vice Chairperson of Nepal Law Commission for 3 years.
Moreover, he has served as Government Secretary /Special Secretary at the Ministry of Law, Justice and Parliamentary Affairs from 1997-2003. He also served as Joint Secretary in different ministries of the government like Ministry of Law and Justice, Ministry of Finance (1995). Presently, he is associated with Nepal Law Society and Nepal Council of Arbitration (NEPCA) along with other NGO’s and alumni associations.
Mr. Guru Prasad Neupane (Director)
Mr. Neupane holds a Master's Degree in Economics from Thammasat University, Bangkok, Thailand as well as from Tribhuvan University Kathmandu, Nepal.
He has worked with Nepal Rastra Bank for thirty years in various senior capacities. He is also the founder of Arun Valley Hydropower Development Company in 1997 and is considered a pioneer of private-owned hydropower development projects in Nepal. He is also the chairman of Arun Valley Hydro Power Company Ltd. He has served as the Executive Chairman cum General Manager of Rastriya Banijya Bank (commercial bank) in 1992. Mr. Neupane is Ex-member of the Board of Directors of Nepal Electricity Authority. He is also the past President of Ex-employees Association of Nepal Rastra Bank.
4. The bank is being operated by a very professional management team. The management of the bank are all well experienced and well attuned with the Nepalese banking practice for a longer period of time. This might help the bank to excel its peers in the years to come.
It might be worthy enough to consider the profile of CEO of the bank in this Case.
Mr. Bijay Pant (CEO)
Bijay has a post-graduate degree in Economics. He joined Nepal Grindlays Bank Ltd in 1991 as a Marketing Officer swiftly rising to Manager in the priority & medium sized export business sector. In 2000, he joined Standard Chartered Bank Nepal Ltd as Relationship Manager for credit dispersal in the priority/deprived & medium sized export business sector and then moved on to do banking with ANZ Banking Group Ltd in Auckland in 2001. There he gained experience as a Credit Analyst in Corporate & Institutional Banking. In 2005, Bijay returned to Nepal and worked for Lumbini Bank for one year as the Assistant General Manager overseeing the restructure/reform there before joining Nepal Investment Bank Limited in 2006 as Assistant General Manager where his responsibilities included managing IT & general services departments, product development & research, portfolio monitoring (asset/liability), strategic planning, and involvement in management decision processes of the bank.
5. Before investing in the bank for a longer period horizon, it would be better to have a personal investigation by the investor himself on the key personnel associated with the bank especially Mr.Guru prasad Neupane and its business practice. Being confident on the key promoter of the Company is the best way to purchase the shares of the company anywhere in the world. And the reality is that opinions are always personal. So it’s always wise to do a little homework.
6. Share Analysis:
With offer price at Rs.100 per share, the share shall be issued at a discount of Rs.6 per share to the book value. And with conservative measure of net profit of the company based on result of 3rd Quarter 2068/69, the offer price shall be at 34 times its current year post tax earnings, while the same ratio comes 25.877 considering the figure of profit for running year taken from prospectus.
However, the offer price of IPOs is usually analyzed using forward P/E, this gives that the offer price shall be at 16.17 times its next year forward P/E.
7. After attaining a proper size or precisely the median size of the industry, the professionally running company would be able to generate returns at least around the industrial average or even surpass it.
Based on prospectus:
ROA of the bank for F/Y 2068/69 = 0.78%
ROE of the bank for F/Y 2068/69 = 3.61%
Average industrial ROA = 1.78%
Average industrial ROE = 17%
This clearly suggests that the bank has a lot of space to successfully increase its profitability in the coming years provided that the bank need to operate more professionally, with ethical practice and efficient internal control system to attain them.
8. There are very fewer occasions often derived by special adverse circumstances, we have ever encountered that the share price of any Commercial bank in our country trade in the secondary market below their par value. Even if such event occurs, we have experienced that they do not last for a longer period.
Moreover, with recent symbols of breakthrough in the secondary market, the price of the commercial banks are expected to receive a warm welcome attached with good premium to par.
9. Our Opinion:
We would like to stay cautiously positive on this IPO with more confident for the short term rather than for a longer time frame. Our opinion is based on following facts:
a. The company has positive net worth, with offer price issued at discount to book value and at a favorable next year forward P/E of 16.17.
b. The Company has adequate capital fund, very nominal non-performing assets (0.03% as of Q3 2068/69), operating profitably at low spread of 2.37% which is much lower than the industrial average, good liquidity and well diversified assets portfolio.
c. Within a short period of time, the bank has been able to operate with more than 20 branches all around the nation.
d. Usually the success of the bank in any country is not just driven by the company related intrinsic factors but subordinated to several other factors including overall economic scenario, market competition, development of related infrastructure and such others which is not still clear in our country.
e. With large number of Bank and other financial institutions in the country, tough competitive environment, sluggish economic growth rate, high inflation; the future is not very predictable for new players.
f. With large number of other financial companies, even some so called giants operating since very long period are opting for mergers or in the process signalize that the perpetuity is governed by different external factors and that the operating environment is not as smooth as it is usually conceived.
Name: Janata Bank Nepal Limited
Business: Banking
Date of operation: 04.05.2010
C.E.O: Mr. Bijay Pant
Chairman: Udaya Nepali Shrestha
No. Of Branches(Including H.O): 23
No. Of ATMs: 10
Head Office: Shankhamul Marg, New Baneshwor, Kathmandu
2.Ownership Pattern:
Domestic Ownership: 100%
Other entities: 3.57%
Others: 96
Foreign Ownership: -
NOTE: The pattern of ownership is based upon latest published annual report.
3.List of Prominent Shareholders:
Shareholders Shareholding in %
Arun Valley Hydropower 2.86
Guru Prasad Neupane 1.63
Jeeven Raj shakya 1.57
Dharma Dhoj Parajuli 1.49
Nabin Jyoti Tuladher 1.43
Satish Neupane 1.28
Ramchandra shah 1.26
Kiran Man Joshi 1.22
Jip Tchering Lama 1.07
Subharatna Shakya 1.07
Nirmal Jyoti Tuladher 1.01
Ganga Shrestha 0.86
Sailendra Guragain 0.84
5.Performance Highlights:
Particulars F/Y 2066/67 F/Y 2067/68 F/Y 2068/69(9 Months)
Total Assets ('000) 2,337,869 5,110,326 8,845,820
YOY Increase in total Assets (%) - 118.59 73.10
Total Deposit ('000) 855,362 3,501,603 6,887,220
YOY Increase in total deposit (%) - 309.37 96.69
Total loan and Advances ('000) 602,247 3,541,266 6,600,675
YOY Increase in total Lending (%) 488.01 86.39
Investment ('000) 75,000 542,029 1,031,328
Net profit ('000) 9,631 30,708 43,783
Non performing Credit/Total Credit (%) - - 0.03
Weighted average interest rate spread (%) 3.24 2.48 2.37
No. of shares(No. in '000) 14,000 14,000 14,000
No. of employees(No.) 93 156 -
6. Critical Analysis:
1. Janata Bank Nepal Limited is the 27th Commercial Bank of Nepal. Promoted by 836 promoters, Janata Bank shall be the first in its kind to have an initial paid up capital of NPR 2 Billion immediately after IPO.
2. Major promoters Of the Bank:
The bank has been promoted by the group of persons running Arun Valley hydropower and other associate companies along with Arun Valley Hydropower. One of the key personel behind operation of this bank is Guru Prasad Neupane and other Neupane families.
Promoters Janata Bank Sahreholding % Promoters Arun Valley H.P Sahreholding %
Arun Valley Hydropower 2.86 Guru Prasad Neupane 6.48%
Guru Prasad Neupane 1.63 Satish Neupane 3.97%
Jeeven Raj shakya 1.57 Ramesh Prasad Neupane 1.17%
Dharma Dhoj Parajuli 1.49 Sumitra Devi Neupane 3.67%
Nabin Jyoti Tuladher 1.43 Jeevan Raj Shakya 6.02%
Satish Neupane 1.28 Amarraja Tamrakar 5.25%
Ramchandra shah 1.26 Sailendra Guragain 4.20%
Kiran Man Joshi 1.22 Krishna Prasad paudel 3.79%
Jip Tchering Lama 1.07 Bhusan Guragain 2.33%
Subharatna Shakya 1.07 Saurav Guragain 2.33%
Nirmal Jyoti Tuladher 1.01
Ganga Shrestha 0.86
Sailendra Guragain 0.84
3. The key Promoters especially Mr. Guru prasad Neupane (director) and Mr. Udaya Nepali Shrestha (Chairman) has very good exposure in banking sector and possess sound knowledge and qualifications required to run any bank professionally or even to excel the other competitors. Taking into consideration their past exposure and long experience in the similar field, the general investors and even the depositors might remain a bit confided over the future success of the bank.
Short Profile of Mr. Shrestha and Mr. Neupane:
Mr. Udaya Nepali Shrestha (Chairman)
Mr. Shrestha holds an M.Com, M.A (Eco.), P.G.D (International Law), LLB degree from different national and international universities.
Prior to attending the board of Janata Bank as Chairman, Mr. Shrestha has served in the capacity of Chairman of Board of Directors in Nepal Investment Bank Ltd., Nepal SBI Bank Ltd. He has also served as director in Tourism Development Bank Ltd., Rastriya Banijya Bank Ltd. and Nepal Telecommunications Corporation. He held the position of Vice Chairperson of Nepal Law Commission for 3 years.
Moreover, he has served as Government Secretary /Special Secretary at the Ministry of Law, Justice and Parliamentary Affairs from 1997-2003. He also served as Joint Secretary in different ministries of the government like Ministry of Law and Justice, Ministry of Finance (1995). Presently, he is associated with Nepal Law Society and Nepal Council of Arbitration (NEPCA) along with other NGO’s and alumni associations.
Mr. Guru Prasad Neupane (Director)
Mr. Neupane holds a Master's Degree in Economics from Thammasat University, Bangkok, Thailand as well as from Tribhuvan University Kathmandu, Nepal.
He has worked with Nepal Rastra Bank for thirty years in various senior capacities. He is also the founder of Arun Valley Hydropower Development Company in 1997 and is considered a pioneer of private-owned hydropower development projects in Nepal. He is also the chairman of Arun Valley Hydro Power Company Ltd. He has served as the Executive Chairman cum General Manager of Rastriya Banijya Bank (commercial bank) in 1992. Mr. Neupane is Ex-member of the Board of Directors of Nepal Electricity Authority. He is also the past President of Ex-employees Association of Nepal Rastra Bank.
4. The bank is being operated by a very professional management team. The management of the bank are all well experienced and well attuned with the Nepalese banking practice for a longer period of time. This might help the bank to excel its peers in the years to come.
It might be worthy enough to consider the profile of CEO of the bank in this Case.
Mr. Bijay Pant (CEO)
Bijay has a post-graduate degree in Economics. He joined Nepal Grindlays Bank Ltd in 1991 as a Marketing Officer swiftly rising to Manager in the priority & medium sized export business sector. In 2000, he joined Standard Chartered Bank Nepal Ltd as Relationship Manager for credit dispersal in the priority/deprived & medium sized export business sector and then moved on to do banking with ANZ Banking Group Ltd in Auckland in 2001. There he gained experience as a Credit Analyst in Corporate & Institutional Banking. In 2005, Bijay returned to Nepal and worked for Lumbini Bank for one year as the Assistant General Manager overseeing the restructure/reform there before joining Nepal Investment Bank Limited in 2006 as Assistant General Manager where his responsibilities included managing IT & general services departments, product development & research, portfolio monitoring (asset/liability), strategic planning, and involvement in management decision processes of the bank.
5. Before investing in the bank for a longer period horizon, it would be better to have a personal investigation by the investor himself on the key personnel associated with the bank especially Mr.Guru prasad Neupane and its business practice. Being confident on the key promoter of the Company is the best way to purchase the shares of the company anywhere in the world. And the reality is that opinions are always personal. So it’s always wise to do a little homework.
6. Share Analysis:
With offer price at Rs.100 per share, the share shall be issued at a discount of Rs.6 per share to the book value. And with conservative measure of net profit of the company based on result of 3rd Quarter 2068/69, the offer price shall be at 34 times its current year post tax earnings, while the same ratio comes 25.877 considering the figure of profit for running year taken from prospectus.
However, the offer price of IPOs is usually analyzed using forward P/E, this gives that the offer price shall be at 16.17 times its next year forward P/E.
7. After attaining a proper size or precisely the median size of the industry, the professionally running company would be able to generate returns at least around the industrial average or even surpass it.
Based on prospectus:
ROA of the bank for F/Y 2068/69 = 0.78%
ROE of the bank for F/Y 2068/69 = 3.61%
Average industrial ROA = 1.78%
Average industrial ROE = 17%
This clearly suggests that the bank has a lot of space to successfully increase its profitability in the coming years provided that the bank need to operate more professionally, with ethical practice and efficient internal control system to attain them.
8. There are very fewer occasions often derived by special adverse circumstances, we have ever encountered that the share price of any Commercial bank in our country trade in the secondary market below their par value. Even if such event occurs, we have experienced that they do not last for a longer period.
Moreover, with recent symbols of breakthrough in the secondary market, the price of the commercial banks are expected to receive a warm welcome attached with good premium to par.
9. Our Opinion:
We would like to stay cautiously positive on this IPO with more confident for the short term rather than for a longer time frame. Our opinion is based on following facts:
a. The company has positive net worth, with offer price issued at discount to book value and at a favorable next year forward P/E of 16.17.
b. The Company has adequate capital fund, very nominal non-performing assets (0.03% as of Q3 2068/69), operating profitably at low spread of 2.37% which is much lower than the industrial average, good liquidity and well diversified assets portfolio.
c. Within a short period of time, the bank has been able to operate with more than 20 branches all around the nation.
d. Usually the success of the bank in any country is not just driven by the company related intrinsic factors but subordinated to several other factors including overall economic scenario, market competition, development of related infrastructure and such others which is not still clear in our country.
e. With large number of Bank and other financial institutions in the country, tough competitive environment, sluggish economic growth rate, high inflation; the future is not very predictable for new players.
f. With large number of other financial companies, even some so called giants operating since very long period are opting for mergers or in the process signalize that the perpetuity is governed by different external factors and that the operating environment is not as smooth as it is usually conceived.
janata banks total no. of employees kati ho
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