ICRA Nepal assigns IPO Grade 4 to the upcoming 16.50 lakh units IPO of Ghalemdi Hydro

ICRA Nepal has assigned an “[ICRANP] IPO Grade 4” rating to the upcoming Initial Public Offering (IPO) of Ghalemdi Hydro Limited (GHL), indicating below average fundamentals. Ghalemdi Hydropower will be issuing 16,50,000 units IPO shares worth Rs 16.50 crore to the general public at a par value of Rs 100 per unit. Of the total shares, 5,50,000 shares will be firstly issued to project affected areas while remaining 1,100,000 shares will be later issued to general public and staff of GHL. As per ICRA Nepal, the assigned grading takes into account the relatively weak return potential of the 5 MW1 Ghalemdi Khola hydro-electric project (HEP) being developed by GHL. The project returns are expected to remain low on account of lower tariff escalations for initial capacity of 4 MW2 , relatively high project cost of NPR 188 million per MW and also over capitalization (debt equity of 41:59 post IPO). Evacuation risk also remains a concern given that the proposed Dana substation for the project is currently in initial stages of development; and the alternative evacuation arrangement through 33 kVA Gharap Substation could result in significant tripping losses especially in wet season and hence causing substantial revenue loss to GHL. Vibor Capital Limited has been assigned as the issue manager for the IPO. Ghalemdi Hydro is developing 5 MW Ghalemdi Khola Hydro Electric Project. It is a run of river (RoR) project located in Ghalemdi River at Myagdi district of Western Nepal. The IPO has been added in the Securities Board of Nepal (SEBON)’s IPO pipeline for approval. 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) added to the grading symbols indicate their relative better position within the grading categories concerned.