United Idi-Mardi and R.B. Hydropower Limited looking to issue IPO worth Rs.10.50 Crore; Care Ratings assigns below average ratings

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. The grade assigned to any individual issue represents a relative assessment of the ‘fundamentals’ of the issuer. UIMHL proposes to issue 1.05 Million shares of face value of Rs.100 each at par aggregating Rs.105 Million.

The grading assigned to UIMHL is constrained by time and cost overrun leading to increase in cost of project, exposure to volatile interest rates and power evacuation risk associated with the project. The grading also factors in hydrology risk associated with run of the river power generation and geological risk. The grading, however, derives strength from experience of the board members and management team in hydropower sector, power purchase agreement (PPA) with sufficient period coverage, low project implementation risk and financial closure achieved for initial project cost, however, funds yet to be tied for the cost overrun. Further, grading is supported by moderate counter party risk, shortage of power in the country and government support for the power sector.

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 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%) as major promoter shareholders of the company. After issue of proposed IPO of Rs.105 Million, the promoters and public holding ratio is expected to be in the ratio of 75:25.

(Source: CARE Ratings Nepal)