Things to know for prospective investors about IPO of United Idi Mardi and RB Hydropower Limited; IPO to locals open from today

Company Profile

United Idi Mardi and RB Hydropower Limited (UIMHL) was initially incorporated as a private limited company on March 1, 2010, as United Idi-Mardi and R.B Hydropower Pvt. Ltd. Later on, it converted to a public limited company on April 17, 2018. It is promoted mainly by individual promoters from different background along with two institutional promoters for setting up of a 7MW run-of-river, Upper Mardi Khola Hydropower Project in the Kaski district of Nepal. This project is constructed under BOOT (Build, Own, Operate, and Transfer) mechanism.

Currently, the share capital of the company is held by 25 promoter shareholders, with Mr. Surya Bahadur K.C (23%), Mrs. Prem Kumari K.C (21.68%), Mr. Anuj Kayal (9.44%), Mr. Roshan K.C (8.78%), and Mr. Sunil Narayan Shrestha (8%) major promoter shareholders of the company. After the issue of the proposed IPO of Rs 105 Mn, the promoters and public holding ratio is expected to be in the ratio of 75:25.

The objective of the issue

About the issue

The company is issuing 10.50 Lakh units as IPO to the general public and project-affected locals at par value of Rs.100 per share to raise a capital worth Rs.10.50 Crore.

Out of the total issue, 420,000 units (10% of issued capital) is meant for the project affected locals while the remaining 630,000 units (15% of the issued capital) is for the general public. Among the units offered to the general public, 2% i.e. 12,600 units have been reserved for the employees of the promoter shareholder company, and 5% i.e. 31,500 units have been reserved for the mutual funds. The remaining 585,900 units will be issued to the general public.

Global IME Capital Limited has been appointed as the issue manager for the IPO issue.

The company had initially planned to accept application form the locals of the project affected area from Chaitra 10, 2076. However, due to the coronavirus outbreak, the company decided to postpone the issue until further notice.

CRNL has assigned grading of ‘CARE-NP IPO Grade 4’ to the proposed Initial Public Offer (IPO) of United Idi Mardi and R.B. Hydropower Limited (UIMHL). ‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals.

Capital Structure

Shareholding Structure

Board of Directors

Management Team

Credit Rating

Care ratings Nepal has assigned grading of ‘CARE-NP IPO Grade 4’ to the proposed Initial Public Offer (IPO) of United Idi Mardi and R.B. Hydropower Limited (UIMHL). ‘CARE-NP IPO Grade 4’ indicates Below Average Fundamentals.

Weaknesses

• Time and cost overrun leading to an increase in the cost of project and exposure to volatile interest rates
• Power evacuation risk
• Hydrology risk associated with run-of-the-river power generation
• Geological Risk

Strengths

• Board members and management team having prior experience in the hydropower sector
• The power purchase agreement with sufficient period coverage
• Low project implementation risk
• Financial closure achieved for initial project cost, however, funds yet to be tied for the cost overrun.
• Moderate counterparty risk
• Shortage of power in the country
• Government support for the power sector

Key Financials

Source: Company Prospectus and ICRA Ratings Nepal