5 Reasons to Apply for Desh General Insurance IPO

5 Reasons to Apply for Desh General Insurance IPO

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Introduction

Desh General Insurance IPO is about to drop and many people are waiting for it.  As investing in IPO can be risky, you must be very cautious about them before you put your money on that basket. Before applying for an IPO, there are some variables that you must bear in mind. In this article, we are about to share the Desh General Insurance IPOs variables. Let’s have a look at the top 5 reasons why you should apply for the Desh General Insurance IPO.

Company Profile

Desh General Insurance Company Limited is one of Bangladesh’s prominent insurance firms. Desh General Insurance Company Limited is registered as a public limited company under the Companies Act 1913 on February 08, 2000, and started operations in 1996 March 2000 with a paid-up capital of BDT 60.00 million. With a credit rating of A+, Desh General Insurance Company Ltd. has accumulated more than BDT 240 million. The Desh General Insurance Company (DGIC) has a position in 43 branches in strategically important parts of the country. They don’t have any subsidiary company. They are currently providing general insurance, fire insurance, marine insurance, motor insurance, engineering insurance, money insurance, and other miscellaneous insurances.  This miscellaneous insurance includes Burglary and Housebreaking, Workmen’s Compensation Insurance, Personal Accident (PA), Peoples Personal Accident (PPA) Insurance. Now lets talk about the Desh General Insurance IPO.

IPO summary

Desh General Insurance launching the IPO at a face value of 10 taka per share with a market lot of 500. They have a credit rating of A+.  The subscription date started from the 14th of February and you can apply for it till 18th February, 2021. The company is planning to invest 20% of the IPO in the capital market, 74.02% in the FDR and treasury bonds sector, and 5.98% in the IPO expense category.

Desh General Insurance IPO RIL Investment rating

The RIL Investment Ranking is considered to be one of the significant indicators that determine the overall performance of the IPO. RIL or Research and Innovation Lab is an initiative of Royal Capital Limited to foster a data driven investment decision process. The investment rating is finalized upon analyzing few of the major indicators of the organization.

In terms of the IPO rating below, we will break down the elements that we considered.

Management Capacity

The management capacity is a very important part of the RIL investment rating because company performance directly influenced by the efficiency of the management. The management board of Desh General Insurance is really experienced and very professional. The company was able to perform at such heights in such a short time because of their experienced members and that is the reason why they scored 4 out of 5 in the management capacity rating.

Financial Performance

Knowing the company’s fiscal year earning is important from an investor’s viewpoint. In the future, the increasing earnings trend would represent the EPS (Earnings per share) of the business. An upward graph of annual earnings indicates a corporation with a stable economic position. This is very important for each company to keep in the stock market and to help the shareholders in the long run. If you are considering the cash flows, profitability and income factor of the company the position of Desh General Insurance is at a very good level. And that is why they are scoring 4 out of 5 in the financial performance section.

Potential of Industry & Business Growth

The potential of Desh General Insurance IPO in its industries is moderate. That’s mainly because the industry is highly competitive and it is really tough to adapt to the changing industry.  That’s why they get 3 out of 5 in the potential of industry and business growth sector.

Planned Use of IPO

Previously we have discussed how and where they are going to invest the fund generated from IPO.  Investing in the capital market and treasury bonds will surely provide a positive output and that is why they get 4 out of 5 in the planned use of IPO money section

Risk Assessment

Risk assessment is a very crucial part of the rating system. That’s why we are dividing the risk assessment part into sections. Firstly, we will have the measurement of the business risk it has and then we’re going to discuss the analyst’s take on the company’s situation.

First, let’s discuss the business risk it has. During the covid-19 period the demand for insurance has increased significantly but due to the insurance system not being able to provide with the market demand the company is facing a bit of backlash. Not only is that but the company also running the risk of facing a huge loss because most of its capital is invested in the stock market. Not to mention the fact that the whole insurance sector has become highly competitive.  Considering all these factors this company has some risky factors.

Many analysts are also skeptical about the company because they think that the company will face a crisis when it comes to giving dividends. The company is actually planning to invest their money in FDRs and treasury.  Because a company makes 6 to 9 percent profit on them they might struggle in fulfilling their required profit goal. Throughout the last five years, they had a very unusual and irregular cash flow even though they maintain the balance of the net margin.

Now showing all these factors in consideration the company scores at 3.2s out of 5 in the RIL Investment rating which puts them just in the investable category.

Desh General Insurance IPO in Last 5 years

In the last 5 years, the company had an equity growth rate of 25% and an asset growth rate of 27%. They also have a good record of giving dividends. Their revenue growth rate is 27% with an NPAT growth of 58%. It shows how promising the company actually is even though it might face risk in the future. We cannot forget that high risk comes with high rewards. That’s why we should do more research and forecast properly before investing in it.

Conclusion 

As Desh General Insurance IPO has an average of 3.2 out of 5 in the RIL rating, this IPO might be quite profitable investment. There are some indicators that suggest that when it comes to financial results, the company is a little cautious, but if you consider the other factors, this is not a poor investment for investors as it falls into the investable category. Demand is strong for insurance services. There is no other time but now to focus on the insurance sector. In the above article, we have discussed the future of this company and its profitability so the ball is now in your court.  It’s now for you to decide if you want to invest in their IPO. If you want to invest then start by opening a B/O account from here

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