Financial Analysis of Deprosc Laghubitta Bittiya Sanstha 2076
June 16, 2019 | Investopaper
The financial analysis of Deprosc Laghubitta Bittiya Sanstha Limited as performed by the Investopaper team is as follows:
Introduction
Deprosc Laghubitta Bittiya Sanstha Limited was registered on January 12, 2001, under the Company Registration Act 1997. Nepal Rastra Bank provided an operating license on July 3, 2001, under the Bank and Financial Institution Act 2007.
Deprosc Laghubitta is promoted by:
- Nabil Bank Ltd,
- Nepal Bank Ltd,
- Agriculture Development Bank Ltd,
- Lumbini Bikas Bank Limited (formerly known as Lumbini Finance and Leasing Company Ltd),
- Development Project Service Center (NGO),
- CEAPRED (NGO) and
- Former bankers having 15-20 years of experience.
Board of directors and the Management team of Deprosc Laghubitta:
The board of directors of Deprosc Laghubitta Bittiya Sanstha Limited includes:
| S.N. | Board Members | Post |
| 1 | Mr. Deepak Khanal | Chairman ( Representing Lumbini Bikas Bank Limited) |
| 2 | Mr. Yagya Prasad Sharma | Director (Representing Nabil Bank Limited) |
| 3 | Dr. Vrigu Rishi Duwadi | Director (Representing General Public) |
| 4 | Ms. Rita Paudel | Director (Representing General Public) |
| 5 | Mr. Ramesh Kumar Raghubanshi | Director (Representing General Public) |
| 6 | Mr. Naresh Man Pradhan | Director (Independent) |
| 7 | Mr. Purna Prasad Acharya | Director (Representing Agricultural Development Bank Limited) |
The management team is led by Mr. Amraj Khadka and is comprised of :
| S.N. | Management Team | Designation |
| 1 | Mr. Amraj Khadka | Chief Executive Officer |
| 2 | Mr. Bhesh Bahadur Basnet | Deputy Chief Executive Officer |
| 3 | Mr. Hem Kumar Kafle | Chief Manager-Planning, Research & Marketing Department |
| 4 | Mr. Puspa Raj Adhikari | Chief Manager- IT and Compliance Department |
| 5 | Mr. Hari Prasad Acharya | Chief Manager-General Service Department |
Financial Highlights of Deprosc Laghubitta: Last 5 Years
Paid-up capital & Net profit:
Deprosc Laghubitta has paid-up capital of Rs. 77.34 crores until the third quarter of F.Y. 2075/76. The microfinance is steadily growing its capital during the last 5 years. The paid-up capital was Rs. 12.73 crores in the F.Y. 2070/71. With the issue of bonus and right share, the company has increased its 6.08 times within the last 5 years. National level retail microfinance companies should meet the minimum paid-up capital of Rs. 40 crores, as directed by the Nepal Rastra Bank. Deprosc has almost double the capital of the minimum requirement.
With the rise in the capital, Deprosc Laghubitta is able to improve its profitability. The net profit stood at Rs. 7.28 crores in the F.Y. 2070/71. The company grew its profit to Rs. 13.43 crores, 18.97 crores, 25.59 crores, and Rs. 26.46 crores respectively in the next 4 fiscal years. The net profit in the first 9 months of F.Y. 2075/76 is Rs. 28.73 crores which annualize to Rs. 38.31 crores. So, the microfinance will be able to increase its profit by 5.2 times in the last 5 years.
| Fiscal Year | Paid-Up Capital (Rs. ‘crores’) | Net Profit (Rs. ‘crores’) |
| 2070/71 | 12.73 | 7.28 |
| 2071/72 | 17.19 | 13.43 |
| 2072/73 | 25.79 | 18.97 |
| 2073/74 | 60.61 | 25.59 |
| 2074/75 | 70.31 | 26.46 |
| Third Quarter 2075/76 | 77.34 | 28.73 |
Deposits and loans:
The growth in net profit can be attributed to aggressive lending by Deprosc Laghubitta. The loans and advances have almost grown by 5.50 times in the five years period. In the F.Y. 2070/71, the loans and advances amounted to Rs. 1.93 Arba which has increased to a whopping Rs. 10.63 Arba until the third quarter of F.Y. 2075/76. This rapid expansion of loans has contributed to the higher profit of microfinance.
Likewise, the deposit collected from the members is at Rs. 3.34 Arba until the third quarter of this fiscal year. This is a growth from Rs. 59 crores deposit collected in F.Y. 2070/71. The deposit collection has improved by 5.66 times during this period. The microfinance has also increased its borrowing rapidly which amounts to Rs. 6.06 Arba until the third quarter of this fiscal year.
| Fiscal Year | Deposits (Rs. ‘Arba’) | Loans & Advances (Rs.’ Arba’) |
| 2070/71 | 0.59 | 1.93 |
| 2071/72 | 0.84 | 2.81 |
| 2072/73 | 1.16 | 3.93 |
| 2073/74 | 1.67 | 5.44 |
| 2074/75 | 2.41 | 7.84 |
| Third Quarter 2075/76 | 3.34 | 10.63 |
EPS and NPL of Deprosc Laghubitta
With the rise in the capital, the Earnings Per Share (EPS) of Deprosc Laghubitta declined in the F.Y. 2073/74 and F.Y. 2074/75. The EPS rose from 42.34 to 54.48 until F.Y. 2072/73. With the shrinkage in the growth of profits, EPS fell to Rs. 36.39 and Rs. 34.21 in the next two years. In the current year, the sharp rise in net profit has led to the rise in EPS to Rs. 49.53. Thus, Deprosc is able to maintain stable EPS even after a huge increment in capital injected.
Likewise, the microfinance has kept the Non-Performing Loans (NPL) below 1 percent during this period. NPL has remained consistent between 0.38 to 0.88. This indicates that the quality of the lending of Deprosc is highly satisfactory during this period. To keep the NPL below one percent while maintaining aggressive growth in loans and advances is praiseworthy.
| Fiscal Year | Earnings Per Share (EPS) | Non-Performing Loans (NPL) |
| 2070/71 | 42.34 | 0.38 |
| 2071/72 | 52.08 | 0.33 |
| 2072/73 | 54.48 | 0.82 |
| 2073/74 | 36.39 | 0.73 |
| 2074/75 | 34.21 | 0.75 |
| Third Quarter 2075/76 | 49.53 | 0.88 |
Dividend History:
The distribution of dividend to the shareholders has declined in recent years. Deprosc Laghubitta provided above 50 percent dividend in F.Y. 2070/71, F.Y. 2071/72, and F.Y. 2072/73. This includes the bonus share of 35, 50 and 35 percent respectively. After providing a dividend above 50 percent in 3 fiscal years, the dividend payout declined to 31 percent and 20 percent in the next two fiscal years (2073/74 and 2074/75). This is due to the huge increment of capital by more than 100 percent from F.Y. 2072/73 to F.Y. 2073/74.
| Dividend | |||
| Fiscal Year | Bonus | Cash | Total |
| 2070/71 | 35 | 15 | 50 |
| 2071/72 | 50 | 2.63 | 52.63 |
| 2072/73 | 35 | 17.63 | 52.63 |
| 2073/74 | 16 | 15 | 31 |
| 2074/75 | 10 | 10 | 20 |
Market Capitalization:
Deprosc Laghubitta is currently valued at Rs. 5.47 Arba. The company had the highest market capitalization of Rs. 8.51 Arba in F.Y. 2072/73 when the share was trading at Rs. 3,300. In F.Y. 2070/71, the company has a market valuation of Rs. 1.41 Arba. As of today, the market capitalization has increased by 3.88 times. The market valuation after climbing the high of Rs. 8.51 Arba, declined to Rs. 4.96 Arba in F.Y. 2074/75.
| Fiscal Year | Market Price Per Share | Market Capitalization (Rs. ‘Arba’) |
| 2070/71 | 1109 | 1.41 |
| 2071/72 | 1340 | 2.30 |
| 2072/73 | 3300 | 8.51 |
| 2073/74 | 1280 | 7.76 |
| 2074/75 | 705 | 4.96 |
| Jestha 30, 2076 | 707 | 5.47 |
Financial Highlights of Deprosc Laghubitta: Third Quarter, 2075/76
The financial performance of Deprosc Laghubitta until the third quarter of F.Y. 2075/76 is quite satisfactory. The microfinance has shown a high growth as compared to the corresponding quarter of the previous year.
The paid-up capital has increased by 10 percent due to the bonus share from the profit of 2074/75. The reserve and surplus have grown by 40 percent to Rs. 64.28 crores, up from Rs. 45.91 crores in 2074/75. Likewise, the borrowings, deposits, and loans have increased by 42.92 percent, 53.92 percent, and 49.51 percent to Rs. 6.06 Arba, Rs. 3.34 Arba and Rs. 10.63 Arba respectively.
The net profit of Deprosc Laghubitta has increased by a massive 61.86 percent. The profit stands at Rs. 28.83 crores, up from Rs. 17.75 crores in the corresponding quarter of the previous fiscal year. The rise in the profit is due to the increase in net interest income by 28 percent to Rs. 58.40 crores. Also, the increase in fees and commission income by more than 125 percent to Rs. 16.67 crores contributed to higher profits in the quarter.
The Earnings Per Share of Deprosc Laghubitta has improved by 47 percent. EPS stands at Rs. 49.53, up from Rs. 33.66 in the corresponding quarter of the previous year. The Non-performing Loans (NPL) and Cost of Fund have declined by 1.12 and 3.1 percent respectively. NPL stands at 0.88 percent while the cost of funds of Deprosc is 9.70 percent in the third quarter of this fiscal year. The net worth per share of microfinance has improved by 10 percent to Rs. 183.11.
The Last Trading Price [Jestha 30, 2076] of Deprosc Laghubitta is Rs. 707. At this price, the stock has a Price Earnings Ratio (P/E) of 14.27. This indicates that the share of Deprosc Laghubitta is currently valued at a fair price.
| Headings | 3rd Qtr, F.Y. 2075/76 | 3rd Qtr, F.Y. 2074/75 | % Change |
| Paid-up capital (Rs.’ crores’) | 77.34 | 70.31 | 10 |
| Reserve and Surplus (Rs.’ crores’) | 64.28 | 45.91 | 40.01 |
| Borrowings (Rs.’ Arba’) | 6.06 | 4.24 | 42.92 |
| Deposits (Rs.’ Arba’) | 3.34 | 2.17 | 53.92 |
| Loans & Advances (Rs.’ Arba’) | 10.63 | 7.11 | 49.51 |
| Net Interest Income (Rs.’ crores’) | 58.4 | 45.49 | 28.38 |
| Net Profit(Rs.’ crores’) | 28.73 | 17.75 | 61.86 |
| Earnings Per Share, EPS(Rs.) | 49.53 | 33.66 | 47.15 |
| Non Performing Loans, NPL(%) | 0.88 | 0.89 | -1.12 |
| Cost of Fund(%) | 9.7 | 10.01 | -3.1 |
| Net-worth Per Share, Rs. | 183.11 | 165.3 | 10.78 |
| Market Price, Rs. [Jestha 30, 2076] | 707 | ||
| P/E Ratio | 14.27 |
Decision
Deprosc Laghubitta Bittiya Sanstha Limited is a good company with strong fundamentals. It is one of the top five microfinance of Nepal. The company has shown strong growth orientation in the last five years. The performance growth until the third quarter is highly encouraging. The company has provided healthy returns to its shareholders in the past and we can expect it to continue in the future. If the company can maintain the current growth rate of above 30 percent, then it might be a stock to hold on.
The decision of whether to invest in the share of Deprosc Laghubitta is completely yours.
(Investments are subject to market risks and investors are advised to do personal homework before making any investment decision. This material is just a guideline for the investors to do further investigations)
