Sanima Mai Hydropower Limited IPO Analysis

Sanima Mai Hydropower Limited IPO Analysis

Issue Manager: NCM Merchant Banking Limited

Introduction of Sanima Mai Hydro Power Limited

Sanima Mai Hydropower Limited  (SMHL) was established under Company Act, 2063 in 2008/09/11 A.D.  as a “Mai Hydropower Private Limited”. Then in 2012/03/16 A.D., according to company Act, 2063 sub (1) (Ka) converted into Public limited.  The company only in the later days of establishment renamed itself to the current name of “Sanima Mai Hydropower Limited”.

The company was established by Sanima Hydropower (P.) Limited (SHPL), which is mainly owned by Non-Resident Nepalese (NRNs), as a Special Purpose Vehicle Company for the implementation of Mai Hydropower Project (MHP). In the initial phase, MHP was proposed as a daily peaking run of river project with an installed capacity of 20.1 MW but after discussion with Nepal Electricity Authority (NEA), the daily peaking option was abandoned (as recommended by NEA) and an optimum simple run-of river scheme with installed capacity of 14.5 MW was technically concluded with NEA in the year 2007.

However, with the amendment in the Power Purchase Agreement between the Nepal Electricity Authority and Sanima Mai Hydropower Limited, the capacity of the Sanima Mai Hydropower Limited (SMHL) has now been increased to 22 MW. The company for the infrastructure development has made an agreement with Himal Hydro and General Construction Limited as per which the construction process due date is on 2014 / 02 / 08 A.D. and the company planned to distribute the electricity generated from the month of July, 2014 A.D. Apart from the Phase I project of22 MW project, the company is also set to commence Phase II of the project -- capacity of 7 MW , which is expected to commission in July 2015

The company is mainly owned by the Sanima Hydropower (P.) Limited, Jay Ganesh Investment Company Pvt. Ltd., Mayur Ganesh Investment Pvt. Ltd., Fund for Hydro Investment Pvt. Ltd, Sanima Bank Limited and other institutions. Along with such institutional investors, the personalities like Dr. Upendra Mahato, Dr. Amrit Tewari, Mr. Jiba Nath Lamichhane , Mr. Sonam Gyatso are also involved in this organization as promoters.

The company has been registered with authorized capital of NPR 2.7 billion and currently it holds issued capital of NPR 1.055 billion and paid up capital of NPR 844 million. Apparently, the company had issue 10% of its issued capital to the local resident of project affected area Illam, to raise capital worth NPR 105.5 million. Now, the company has floated remaining 20% of issued capital worth NPR 211 million to the general, to come par to the issued capital of the company. The company registered office is Sanima Mai Hydropower Limited situated in Kathmandu ward no-1, Naxal, Kathmandu.

Major shareholders of Sanima Mai Hydro Power Limited as per the Prospectus

Board of Directors of Sanima Mai Hydro Power Limited

Mr. Tek Raj Niraula, Chairman

Qualification: Master's Degree in Civil Engineering(specialization in construction Hydraulic Structures and Hydroelectric Power Plant) from People's Friendship University Moscow, Russia.

Work Experience: Board of Directors, Sanima (P.) Ltd which holds a controlling share on Kantipur Television Network (P.) Ltd. and Medicare National Research Hospital. Mr. Niraula is currently holding Chain of Electronics Business and others.

Dr.  Subarna Das Shrestha, Director

Qualification: Doctor of Philosophy (Ph. D.), 1998, in Technical Sciences (Hydro-technical and Land Reclamation Construction); State Supreme Certifying Committee of Russian Federation, Moscow

M. Sc. (Hydraulic structures and hydroelectric power plant), 1991, Moscow Institute of Hydro-technical Engineering and Land Reclamation, Russia

Work Experience: More than 17 years of experience in the field of engineering sector.

Mr. Sonam Gyatso, Director

Qualification: Bachelor of Science (Bsc)

Work Experience: Involvement in various businesses.

Mr. Mahesh Ghimire, Director

Qualification: Bachelor of Commerce (B. Com)

Work Experience: More than 14 years of experience in related field and is associated with Sanima Bank Ltd.

Mr. Pashupati Bhandari,  Director

Qualification: Master of Business Administration (MBA) from London

Work Experience: Board of Director, Sanima Mai Hydro; Managing Director, Everest Inn Restaurant Group UK; Managing Director, Everest Connection Limited UK;  Board of Director, Nepali T.V UK;  Promoter, NRN Investment Limited.

Board of Directors (BOD) shareholding in the company as per Prospectus.

Key Personnel In Sanima Mai Hydro Power Limited.

Mr. Tuk Prasad Paudel, Chief Executive Officer
Qualification:  Master of Science degree in Hydraulics and Hydropower

Work Experience: He is a Hydropower Engineer with 19 years work experience in Hydropower Project study, planning and development. He is an expert in hydropower development and also holds experience in the field of project management. He is involved in overall project development phases related with Sanima Hydro.

Dr. Subarna Das Shrestha

Qualification: Doctor of Philosophy (Ph. D.), 1998, in Technical Sciences (Hydro-technical and Land Reclamation Construction); State Supreme Certifying Committee of Russian Federation, Moscow.
M. Sc. (Hydraulic structures and hydroelectric power plant), 1991, Moscow Institute of Hydro-technical Engineering and Land Reclamation, Russia.

Work Experience: He has been engaged in the hydropower projects for the establishment of Sanima Hydropower (P.) Ltd. He possesses a wide range of knowledge both in the technical field and on policies and acts relating to hydropower development in Nepal including environmental study procedures and financing aspects of the projects. He has 19 years of long working experience focused mainly in the field of hydropower development and environmental assessment. Currently he holds the position of Managing Director for Sanima Hydro & Engineering (P.) Ltd., one of the sister organization of Sanima Hydropower (P.) Ltd.

Mr. Ajoy Karki
Qualification:  Master of Science degree in Hydraulic Engineering, (Branch: River Engineering and River Basin Development) from IHE-UNESCO, The Netherlands (2000).

Work Experience: He is a water resources engineer with 20 years experience in the management, design and study of hydropower, rural electrification and renewable energy projects both in Nepal and internationally. His international experience covers over 10 countries in Asia and Africa for multinational agencies such as the Asian Development Bank, German Bank for Reconstruction (KfW), USAID, UNEP and Winrock International. He is in the position of Senior Technical Advisor for Sanima Hydropower (P.) Ltd.

Mr. Bhoj Raj Poudel, Residence Engineer for construction

Qualification:  Master degree in hydropower development from Norwegian Science and Technology (NTNY).
Work Experience: He is a hydropower Engineer with around 17 years experience. He is responsible for the planning and construction of Mai Hydropower Project (15.6 MW) and is under starting stage. He is involved in the construction of more than 4 numbers of Hydropower Project .He was involved in Jhimruk 12 MW) ,Khimti(60 MW), Sunkoshi (2.5 MW) ,Pheme Khola(1 MW) .He has worked as a Headwork Engineer in Sunkoshi Hydropower Project as a Residence engineer for construction of (1MW) Pheme Khola Small Hydropower Project .He is in the position of Residence Engineer for construction of Mai Hydropower Project (15.6 MW).

Mr. Grishma Ojha, Senior Engineer (Electrical)

Qualification:  Master's Degree with NOMA fellowship in Electrical Power Engineering from Norwegian University of Science and Technology and Kathmandu University.

Work Experience: He has experience of more than 7 years in the field of electrical design of transmission lines and various electrical and control equipment of hydropower plant. He is also experienced in the field of operation, maintenance and management of hydropower plant. He is responsible for planning & preparation of electrical designs, preparation of technical specification of electromechanical equipments, transmission lines and various units of the power house and switch yard and in addition to this he is also involved in overall management, operation and maintenance of hydropower plant.

Mr. Sameer Rijal, Head of Finance Department

Qualification:  Executive Master Degree of Business Administration (EMBA) from Ace Institute of Management , Kathmandu, Nepal.
Work Experience: He has over 8 years of experience in financial management in hydropower, FMCG products and tourism sector. He is responsible for planning, management and finalization of a company's books of account.

Mr. Nishant KC, Engineer

Qualification:  Master Degree in Civil Engineering and

Work Experience:  He has over 5 years of work experience in hydropower, building and other civil engineering related activities. He is responsible for hydropower project planning and management, construction supervision and detailed feasibility study of different projects.

Mr. Busanta Kumar Paudel, Social Environmentalist
Qualification:  Master Degree in Sociology/ Anthropology from Tri- Chandra Multiple Campus.

Work Experience:  He is the social coordinator of MHP and is responsible for EIA implementation and handling social issues of MHP. 

Capital Structure

FINANCIAL HIGHLIGHTS OF THE COMPANY

                                                                                                                                Figure in Rs “000”

Looking at the company’s capital structure, of the NPR 1,055 million issued capital, the company currently holds 70% of the issued capital which is invested by promoters only. According to the regulation, the company has to make provision of 10% of the issued capital to the people residing in the area affected by the industry which the company has successfully completed few months back. Now, the company plans to raise capital worth Rs 211 million from this second round of offering i.e. remaining 20% of the issued capital

Observing reserve and surplus of the company, it had maintained a negative figure in the FY 2066/67. However, in the following years it has maintained a positive figure in the reserve and surplus.

As the company is still in its initial phase and in the process of building itself, the company hasn’t yet started to distribute electricity for income flow. Apparently, the main income source is the interest income and other source of income because of which we can see there is no substantial and stable growth in the income. However, the company has set a construction due date within this year and plans to distribute the electricity within the first quarter of next fiscal year which will surely help to stable and bolster the income flow in the days to come.

Likewise, as mentioned above the company is in the building process; so it is bound to increase its expenses which if we look above in the table can find that the expenses have increased from 21.75% to 32.03% in between the FY 2067/68 and FY 2068/69. However, the expenses in last fiscal year has down by 33.86%.

With the ratio high expenses to low income level, the net profit of the company in the last FY2069/70 came down by 211.10%, causing a loss of Rs 8.11 million. But, with the start of distribution of electricity from next fiscal year and lower in the construction expenses, the net profit of the company is bound to peak pace in upcoming days.

*The figure is in negative

If we look at the Net Worth of the company, it has come above par from FY 2067/68 before that it was below par. However, in the past two fiscal year the company’s net worth value has come down to Rs 102.89 and Rs 101.56 respectively. With the company’s lack of growth in the last fiscal year, the overall performance has plunged compared to FY 2068/69.

Similarly, looking at the figure of EPS, ROA and ROE, the company was better off in FY 2067/68 than last fiscal year 2069/69. If we look at the ROE in FY 2069/70, the return is in negative which the investors should keep in mind before investing.

In conclusion, the company is developing two hydropower projects with an aggregate capacity of 29 MW. Phase I of the project is of a capacity of 22 MW and is expected to commission in July 2014 while Phase II of the project is of a capacity of 7 MW and is expected to commission in July 2015.

Since both phases are in construction stage, the company hasn’t yet started generating income from its core business i.e. through the distribution of electricity, which has damper the company’s performance. However, after the completion of the overall infrastructure and distribution of full fledge electricity by next fiscal year, the growth in the company’s performance will be in a much better position.

Similarly, the immense opportunity of  growth prospect for hydel companies in Nepal along with limited presence of hydro companies in Nepse, will surely encourage investors. So, the investors with the motive of short term position can make benefit as there is no provision for minimum 3 years holding period like that of first round of IPO issued by company for projected affected Illam district.

Apart from it, with the prospect of long term position also it has high potentiality of becoming more beneficial as the hydro power company’s tend to give stable and handsome return in the long run to their investors.

COMPANY’S WEBSITE: http://www.maihydro.com/

FOR INFORMATION ON FORM SUBMISSION COUNTERS: CLICK HERE