ICRA Nepal assigns IPO Grade 4 to 200% right share of Api Power Company

ICRA Nepal Limited has assigned IPO Grade 4 rating to the upcoming 200% right share of Api Power Company Limited (API), indicating below average fundamentals. The process of right share issuance is currently pending approval from Securities Board of Nepal (SEBON). The assigned grading factors in the rich experience of the promoters and management in the field of hydropower (group has four operational hydro-electric projects totalling 14.4 MW and five projects totalling 157.9 MW in various stages of development). The promoters have strong execution capabilities having commissioned 8.5 MW Naugarh Project in August 2015, and are currently involved in the development of 8 MW Upper Naugarh Project (which is almost 40% complete) and 75 MW Trishuli Galchhi Project (being developed by Siddhakali Power Limited where API will hold around 24% stake). The company has also been awarded 8 solar projects with aggregate capacity of 18 MW. As per ICRA Nepal, the grading is hampered by the significant execution and funding risks involved in its various projects (75 MW Trishuli and solar projects) which are currently in their opening stages. Additionally, ICRA Nepal draws limited comfort from the proposed solar projects as these would be the first of its kind venture in Nepal with the group companies lacking experience in construction and maintenance of solar projects. The grading is also constrained by poor operating performance of the operational project on account of lack of requisite evacuation structures from NEA. Likely dilution in the profitability indicators of API arising from 200% rights issue and uncertainty about the revenue stream from proposed projects has also been factored into the grading. Api Power Company posted a net profit of Rs 7.40 crore up to the end of fourth quarter of FY 2073/74. ICRA Nepal assigns IPO grading on a scale of IPO Grade 1 through IPO 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) appended to the grading symbols indicate their relative better position within the grading categories concerned.