NESDO Laghubitta Q4: Heavy NPL Pressure Drags Earnings into Red Despite Strong Revenue Base

NESDO Sambridha Laghubitta Bittiya Sanstha Limited (NESDO) has published its audited Q4 report for FY 2024/25, reflecting a mixed financial picture with resilient revenue generation but negative profitability due to rising loan defaults and high operating costs.

The company recorded total revenue of Rs. 530.40 million, down 33.31% YoY compared to Rs. 626.27 million in Q4 2023/24. Sequentially, revenue showed mild recovery over the quarters but still struggled to reach last year’s levels.

Gross profit stood at Rs. 291.89 million, maintaining a healthy margin of 55.03%, close to the historical trend (56.27% last year). This indicates that core income from microfinance operations is still strong.

However, the bottom line tells a different story. NESDO posted a net loss of Rs. 10.09 million in Q4, reversing the profit of Rs. 67.86 million earned in the same quarter last year. The net margin slipped to -1.90%, marking the third consecutive quarter of losses (Q2: -53.03%, Q3: -30.55%).

Profitability indicators also worsened. Return on Assets (ROA) dropped to -0.24% (vs. 1.43% last year), while Return on Equity (ROE) fell to -1.23% (vs. 6.82%). Similarly, EPS (annualized) dropped deeply into the red at -3.47, compared to a strong Rs. 26.61 in the same quarter last year.

Despite weak earnings, market value per share remained high at Rs. 1,716.78, even above last year’s Rs. 2,099.00, reflecting continued investor confidence in the company’s long-term potential. Book value per share, however, declined to Rs. 263.44 from Rs. 399.31 a year ago.

Financial Sector Indicators

• Capital Fund to RWA improved to 12.51%, from 10.22% last quarter, but still moderate compared to peers.

• NPL ratio surged to 21.06%, reflecting significant stress in loan recovery, up from 12.58% last year.

• Loan loss provision coverage stood at 120.90%, slightly improved but highlighting the strain of rising bad loans.

• Credit-to-deposit ratio remains highly stretched at 167.84%, far above the regulatory comfort zone.

• Base rate stood at 15.06%, with a net interest spread of 4.84%.

The company did not declare any dividend for this quarter, unlike the Rs. 15 per share dividend announced in the previous year.