IPO of Shiva Shree Hydropower opens from Ashwin 16; Information you need to make your investment decision

Company profile

Shiva Shree Hydropower Company is a public company, incorporated on March 31, 2006 as private limited company and changed to public limited company on December 14, 2016. The company is promoted by various institutional promoters as well as individual promoters from different background for setting up of a 22.2 MW run-of river, Upper Chaku ‘A’ Hydro Electric Project (UCHP) in Sindhupalchowk district of Nepal. The project is constructed under BOOT (Build, own, Operate and Transfer) mechanism.

Shiva Shree Hydropower Company has 150 promoter shareholders who have contributed Rs 1,107 Mn equity share capital as on January 27, 2018. Yeti Trade and Developers Pvt. Ltd (hold 25.30%), Baidik Hydro Investment Company Pvt. Ltd (hold 9.59%), Mr. Bishnu Bahadur Khatri (hold 6.04%), Mr. Bachhu Paudel (hold 5.81%) and M.I.A Investment Pvt. Ltd (hold 5.42%) are the major shareholder of the company. Currently 100% share capital of the company is held by promoter shareholders. After issue of purposed Initial Public Offer (IPO) of Rs 369.10 Mn (40% to local public of project affected area and 60% to general public) promoters and public holding will be 75:25 and share capital will be Rs 1,476 Mn. The share issuance to the local public of project affected area is already issued and is partially subscribed.

Objective of the issue

About the issue

Shiva Shree Hydropower Limited is issuing 33,51,140 units (including 11,36,540 units unsubscribed by locals) IPO shares to the general public from Ashwin 16, 2076. The early closing date of this IPO issue is Ashwin 24, 2076 and if the issue is not subscribed till Ashwin 24 then this issue can be extended upto Kartik 15, 2076.

The paid up capital of the company after the IPO will be Rs 1.47 arba. After the issuance of IPO, the promoter shareholders will be holding 75% while the project affected locals will hold 2.31% and the ordinary shareholders will hold 22.69% stake.

2,68,091 units which have been reserved for the employees and mutual funds is also issued to general public.

Applications can be place for minimum 10 units and maximum 10,00,000 units. Siddhartha Capital Limited is appointed as the issue manager for the IPO issuance.

CARE Nepal had assigned Grade 4 rating to the IPO issuance indicating below average fundamentals.

Currently, it has been developing ‘Upper Chaku Hydroelectric Project’ of capacity 22.2 MW located at Sindhupalchowk district of Nepal. The per megawatt cost is Rs 22.45 crore and total cost of project is Rs 4.98 arba. The normal payback period of project is 9.59 years and discounted payback period is 21.95 years.

About the project

Capital structure

Shareholding structure

Primary shareholders

Board of Directors

Management Team

*There are 98 employees in total.

CARE Rating

CRNL has assigned grading of ‘CARE-NP IPO Grade 4’ to the proposed Initial Public Offer (IPO) of Shiva Shree Hydropower Limited. ‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals. 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. 

Strength and opportunities

1. Experienced Board Members and management team
2. Low project implementation risk
3. Low power evacuation risk and additional income from sharing of transmission line
4. Moderate counter party risk
5. Shortage of power in the country
6. Government support for the power sector

Weaknesses and threats

1. Significant time and cost overrun leading to high cost of project and late COD penalty
2. Low tariff rate as well as decrease in project life lead to low return from project
3. Financial closure yet to be achieved for increased project cost
4. Hydrology risk associated with run-of-the-river power generation
5. Geological Risk

Source: CARE Rating report (https://careratingsnepal.com/rating-list/)

Assets in current price

Insurance status

Financials

Source: Company prospectus and CARE Rating report