Nerude Mirmire Laghubitta Reports Mixed Performance in Q3 of FY 2081

Nerude Mirmire Laghubitta Bittiya Sanstha has published its unaudited third-quarter financial report for fiscal year 2081, showing a mixed set of financial indicators compared to the same period of the previous year (FY 2080).

Operating Performance: Income Rises, Profit Plummets

The microfinance institution’s core earnings showed notable growth. Net interest income surged by 58.82% to Rs. 1.01 billion from Rs. 640.59 million in the previous year. Likewise, net fee and commission income also improved by 32.99%, reaching Rs. 126.59 million. As a result, total operating income rose significantly by 42.29% year-on-year, reaching Rs. 1.14 billion.

However, this growth in income was overshadowed by a dramatic 109.90% rise in impairment charges, which ballooned from Rs. 157.03 million to Rs. 329.61 million. This increase in provisioning had a devastating impact on profitability, dragging operating profit down by 70.81% to Rs. 74.80 million. Ultimately, profit for the period collapsed by 70.80%, dropping to just Rs. 57.90 million compared to Rs. 198.31 million last year.

Earnings and Valuation Metrics Take a Hit

Due to the substantial drop in net profit, the company’s Earnings Per Share (EPS) declined sharply from Rs. 32.81 to Rs. 5.52, representing a fall of Rs. 27.29. The distributable EPS also turned negative, at Rs. (8.38) from a positive Rs. 1.61 last year, indicating the company is in no position to distribute profits at this point. Consequently, the distributable profit also stands at a negative Rs. 117.16 million.

Interestingly, the company’s PE ratio soared to 118.86, reflecting its low earnings in relation to its current stock price, and perhaps signaling an overvalued share price amid weak profitability.

Balance Sheet Metrics: Moderate Growth and Reserves Decline

On the balance sheet side, the company maintained its paid-up capital at Rs. 1.39 billion, unchanged from the previous quarter. Retained earnings turned from negative Rs. 117.16 million to a positive Rs. 52.90 million within the fiscal year, indicating some internal improvement in earnings accumulation over the quarters. However, total reserves dropped from Rs. 1.41 billion to Rs. 1.27 billion — a decline of 1.83% — showing stress in overall surplus reserves.

Loan and advances increased slightly by 0.20% to Rs. 20.18 billion, while deposits and borrowings rose by 1.63% to Rs. 17.45 billion, showing modest growth in financial intermediation.

Credit Quality and Interest Margin

The Non-Performing Loan (NPL) ratio rose to 14.81% from 8.83%, indicating a deterioration in asset quality. This sharp increase could be a contributing factor behind the steep rise in impairment charges.

The cost of funds has also increased substantially from 9.67% to 11.57%, indicating higher borrowing costs. The base rate declined slightly from 14.02% to 13.20%, which may suggest some easing in lending rates. Despite this, the interest rate spread widened from 5.33% to 7.63%, potentially indicating improved margins.

Capital Adequacy and Net Worth

The capital fund to risk-weighted assets (RWA) ratio improved from 4.92% to 8.45%, reflecting a healthier capital position. Net worth per share also increased from Rs. 178.58 to Rs. 192.66, providing a cushion of confidence to investors regarding the company’s intrinsic value despite the earnings slump.

Conclusion

Nerude Mirmire Laghubitta’s third-quarter performance is a textbook case of rising revenues being overshadowed by surging provisions and deteriorating asset quality. While income has grown across the board, the sharp rise in impairment charges and NPLs has severely impacted profitability and earnings metrics. Going forward, the institution must prioritize improving its loan book quality to restore investor confidence and regain financial momentum.