Care Ratings Nepal assigns CARE-NP IPO Grade 3 to proposed right issue of Ngadi Group Power; the company set to issue more than 16 Lakh units as right shares

Care Ratings Nepal Ltd. (CRNL) has assigned grading of ‘CARE-NP IPO Grade 3 [IPO Grade Three]’ to the proposed Right Share issue of Ngadi Group Power Limited (NGPL). ‘CARE-NP IPO Grade 3’ indicates Average Fundamentals of the issue.

CRNL assigns IPO grades on a scale of Grade 1 to Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. CRNL’s IPO grading is an opinion on the fundamentals of the issuer. The grade assigned to any individual issue represents a relative assessment of the ‘fundamentals’ of the issuer.

NGPL has proposed issue of 1,606,664 units of equity as 30% right shares at face value of Rs.100 each at par aggregating Rs.160.6664 Million.

The grading assigned to Ngadi Group Power Limited (NGPL) derives strength from reputed Board Members having experience in hydropower sector and its power purchase agreement (PPA) with Nepal Electricity Authority (NEA) with sufficient period coverage and its healthy financial risk profile characterized by low gearing levels and comfortable debt coverage indicators. The grading also factors in shortage of power in the country and government support to the power sector.

The grading, however, is constrained by operating at low plant load factor (PLF) over the period, promotional tariff rate ending in FY20 will lead to lower revenue, execution risk of the project under construction in which NGPL has invested, moderate counter hydrology to generate contracted energy and timely receipt of the payments from NEA are the key grading sensitives.