ICRA Nepal assigns [ICRANP] IPO Grade  4 to Rs 96.61 crore worth of IPO of Universal Power; rating indicates below-average fundamentals

ICRA Nepal Limited has assigned a [ICRANP] IPO Grade  4 (Pronounced as ICRA NP IPO Grade Four) to the Rs. 96.61 crore Initial Public Offer of Universal Power Company Limited. Instruments with this grading are considered to have below-average fundamentals.

The assigned grading considers the risks associated with timely commissioning of 11 MW Tallo Khare Khola HPP being developed by UPCL. Power from the HEP will be evacuated through 132 KV Lamosanghu-Singati transmission line being developed by Nepal Electricity Authority (NEA).

Nonetheless, the assigned grading factors in experience of the promoters and management personnel in the field of HEP development and operation. The group companies have operational hydropower capacity of ~8.5 MW3 with the first project of the group operating since 2001. With a firm Power Purchase Agreement (PPA) in place for under construction 11 MW Tallo Khare Khola HPP, the tariff and off-take risks are reduced considerably for the project.

ICRA Nepal assigns grading on a scale of Grade 1 through Grade 5, with Grade 1 indicating strong fundamentals and Grade 5 indicating poor fundamentals. For the Grading categories 2, 3 and 4, the sign of + (plus) indicates their relative better position within the Grading categories concerned.  IPO Grade is not a recommendation to buy, sell or hold securities nor it is a comment on the price or valuation of securities.

Universal Power Company Limited (UPCL) is an associated company of CEDB Hydro Fund Limited (CHF). CHF and its affiliate companies have ~9% stake in UPCL5 . UPCL’s ownership pattern is highly fragmented with more than 4,700 shareholders (mostly individual). UPCL was incorporated in 3rd December 2002 (as a private limited company) and converted to public limited (30th March 2011) for enabling public participation.