Salapa Bikas Bank Limited is preparing to issue its Initial Public Offering (IPO) after almost 12 years of operation as a regional development bank in Khotang. The bank will open its IPO for Nepalis working abroad from 25th Mangsir 2082, followed by a public issue for general investors.
This analysis looks at the bank’s formation history, current financial standing, performance trends, risks, and future plans to help investors understand what they are subscribing to.
1. Background and Establishment
Salapa Bikas Bank Limited was established in 2012 (2069 B.S.) under a special approval of Nepal Rastra Bank. At that time, Khotang did not have adequate access to organized banking services. To address the financial gap, NRB allowed the creation of a regional development bank with a limited working area.
Head Office: Diktel, Khotang
Branches: 6 (Diktel, Aiselukharka, Bakshila, Halesi, Simpani, Chisapani)
Operating License: Received on 1st Ashad 2069
Name Origin: Named after Salpa Pokhari, a culturally significant and sacred lake in the region.
The bank is promoted by individuals from various professions within the district.
2. IPO Structure
The bank’s issued capital is Rs. 52.23 crore, and it is offering 33% of this to the public.
Breakdown of Shares to Be Issued
| Category | Units |
|---|---|
| Nepalis working abroad | 1,72,388 units (10%) |
| Mutual Funds | 86,194 units (5%) |
| Employees | 26,119 units (0.5%) |
| General Public | 14,39,179 units |
| Total Public Issue | 17,23,880 units |
Issue Manager: Muktinath Capital Limited
Credit Rating: IRN B (Is) — indicating high risk regarding timely repayment of obligations.
3. Capital, Deposits, and Lending Position
As of the end of Ashar 2082, the bank has:
Paid-up Capital: Rs. 52.23 crore
Total Assets: Rs. 1.78 arba
Total Deposits: Rs. 1.33 arba
Total Loans: Rs. 1.08 arba
This shows the bank operates at a relatively modest scale compared to other regional development banks.
4. Revenue and Profit Trend
Interest Income
FY 2078/79: Rs. 10 crore
FY 2081/82: Rs. 14 crore
This growth is moderate, but interest income has increased steadily over four years.
Interest Expense
FY 2078/79: Rs. 4.77 crore
FY 2081/82: Rs. 7.14 crore
Interest expenses have grown sharply, indicating competitive deposit rates and increased cost of funds.
5. Operating Profit and Net Profit
Operating profit has shown pressure:
FY 2078/79: Rs. 2.14 crore
FY 2081/82: Rs. 1.04 crore (almost 50% drop)
Net profit margin and earnings have declined due to rising staff expenses and administrative costs.
Key Ratios (As of Ashar 2082)
EPS: Rs. 2.24
Net Worth Per Share: Rs. 105.14
NPL (Target): Below 3%
The current EPS is low compared to industry standards, but net worth remains slightly above face value.
6. Expense Growth: A Major Concern
The bank’s expenses have surged significantly:
Staff Expenses
FY 2078/79: Rs. 3.66 crore
FY 2081/82: Rs. 5.30 crore
Other Operating Expenses
FY 2078/79: Rs. 1.03 crore
FY 2081/82: Rs. 1.27 crore
Operational costs have increased faster than income, directly impacting profitability.
7. Future Plans and Targets (Published by the Bank)
The bank has shared a three-year projection that appears ambitious:
Profit Projection
FY 2082/83: Net profit to grow by 158%
FY 2083/84: Profit to grow by 187%
Deposits Growth
FY 2082/83: +62%
FY 2083/84: +49%
FY 2084/85: +30%
Loan Growth
FY 2082/83: +80%
FY 2083/84: +49%
FY 2084/85: +29%
Earnings Projection
EPS target for FY 2084/85: Rs. 9.23
Net worth target: Rs. 115.37 per share
These targets suggest aggressive expansion plans, but achieving them will depend heavily on risk management, branch activity, local economic capacity, and deposit mobilization.
8. Risk Considerations for Investors
1. Credit Rating “IRN B (Is)”
Indicates higher default risk compared to stronger-rated institutions.
2. Regional Concentration
The bank operates primarily in Khotang. Local economic challenges may affect growth.
3. Low Current Profitability
EPS and operating profit have dropped consistently for four years.
4. Rising Cost of Funds
Higher deposit rates reduce interest margin.
5. High Expense Structure
Staff and administrative costs are growing faster than revenue.
9. Strengths
Despite weaknesses, the bank has some positives:
1. Improving Asset Base
Assets have steadily grown.
2. Consistent Loan Growth
Loan expansion indicates increasing market penetration.
3. Net Worth Above Par
Even with low profit, net worth remains above Rs. 100.
4. Local Market Dominance
As a regional bank, it holds strong presence in remote Khotang areas.