IPO of Buddha Bhumi Hydropower Opening Today; What Do the Financials Tell About the Company?

Company Profile:

Incorporated in October 2007 as a private limited company, Buddha Bhumi Nepal Hydropower Company Limited (BBHCL) was converted into a public limited company in August 2017 to facilitate public participation.

The company’s paid-up capital was ~NPR 277 million as of mid-April 2019 (including share application money of ~NPR 191 million). The company is promoted by 79 individual promoters. The major promoters include Mr. Pramod Khadka (~19%), Mr. Purna Lal Shrestha (~11%), Mr. Anil Kumar Thapa (~7%), Mr. Balram Khatiwada (~7%), among others.

The promoter holding after the proposed IPO issue is expected to dilute to 70%, assuming full subscription. The shares of the company are proposed to be listed in the stock exchange post the proposed IPO. BNHCL is developing the 4.993-MW Lower Tadi Khola Hydropower project in the Nuwakot district of Province-3, Nepal.

About the Issue:

Buddha Bhumi Hydropower Company Limited is issuing 8,00,000 units of ordinary shares worth Rs. 8 crores to the general public from Ashwin 11. The early closing date of this IPO issue is on Ashwin-14, 2078. If this issue is not fully subscribed till Ashwin-14, 2078 then the issue will be extended up to Ashwin 24, 2078.

The company is set to issue a total of 800,000 units of shares i.e., 20% of the total issued capital from Ashwin-11, 2078. From the total of 800,000 units, 40,000 units i.e., 5% are for mutual funds. 2% of the total units i.e., 14,000 units are for the employee of the company, and the remaining 744,000 units are for the general public.

Applications can be placed for a minimum of 10 units to a maximum of 50,000 units.

Civil Capital Limited has been appointed as the issue manager for the IPO issuance.

Sahas Urja Limited:

Particulars

Percentage

Units

Amount

Total Capital

100%

4,000,000

400,000,000

Total Issue

20%

800,000

80,000,000

Employees

2% of IPO Units

16,000

1,600,000

Mutual Fund

5% of IPO Units

40,000

4,000,000

General Public

93% of IPO Units

744,000

74,400,000

Issue Manager

Civil Capital Market Limited

   

Issue Open Date

Ashwin 11, 2078

   

Issue Closing Date (earliest)

Ashwin 14, 2078

   

Issue Closing Date (Late)

Ashwin 25, 2078

   

Minimum Application

10

   

Maximum Application

50,000

   

 

ICRA Rating:

ICRA Nepal has assigned an issuer rating of [ICRANP-IR] BB- (pronounced ICRA NP issuer rating double B minus) to Buddha Bhumi Nepal Hydropower Company Limited (BBHCL).

Credit Strengths:

  • Lowering project execution risks and low finding risks
  • Relatively high plant load factor and a high share of dry energy
  • Low tariff and offtake risks with the presence of long-term PPA at predetermined tariffs and escalations

Credit Challenges:

  • Moderate return indicators amid relatively higher project cost
  • High evacuation risks given the non-completion of NEA’s evacuation structures
  • Limited experience of major promoters in hydropower project execution
  • High hydrology risks, given the lack of deemed generation clause in PPA

(Source: ICRA Nepal)

Capital Structure: 

Capital Structure

Authorized Capital

750,000,000

Issued Capital

400,000,000

Current Paid-Up Capital

280,000,000

Capital after IPO Issuance

400,000,000


Shareholding Structure:

 

Number of Shares

Amount

Percentage

Remarks

Promoters Shareholders

2,800,000

280,000,000

70%

Already Issued

Project affected locals

400,000

40,000,000

10%

Already Issued

General Public

800,000

80,000,000

20%

To be Issued

Total

4,000,000

400,000,000

100%

-

Board of Directors: 

Board of Directors

Name

Position

Purna Lal Shrestha

Chairman

Balaram Khatiwada

Director

Pramod Khadka

Director

Shekhar Kumar Subedi

Director

Deepak Lal Amatya

Director

Projects:

Name of Project

Lower Tadi Khola Hydropower Project

Type of Project

Run-of-River

Installed Capacity (MW)

4.99

Total Cost

1,190,000,000

Cost per Megawatt

238,476,954

Required Commercial Operation Date (RCOD)

1-Oct-21

Financial Highlights:

Particulars

Actual

Estimated*

2074/2075

2075/2076

2076/2077

2078/2079

2079/2080

2080/2081

Total Paid-Up Capital ('000)

217,545.08

280,000.00

280,000.00

400,000.00

400,000.00

400,000.00

Reserve & Surplus ('000)

-33,882.07

-42,321.79

-33,484.41

-18,712.16

55,266.06

94,061.10

Debt ('000)

0.00

396,628.67

602,138.41

564,246.75

542,459.34

520,643.90

Revenue ('000)

0.00

0.00

0.00

182,019.26

187,409.87

192,896.81

Interest Expenses ('000)

0.00

0.00

0.00

61,245.49

57,549.67

53,767.37

Net Profit ('0000

-3,787.20

-8,439.71

-4,466.63

64,909.16

73,978.22

83,007.84

Earnings per share (Rs.)

-1.74

-3.01

-1.60

16.23

18.49

20.75

Net worth per share (Rs.)

84.43

84.89

88.04

95.32

113.82

123.52

Debt-Equity (times)

0.00

1.67

2.44

1.48

1.19

1.05

Return on Equity (%)

-2.06%

-3.55%

-1.81%

17.02%

16.25%

16.80%


How much to apply for?

When we observe the current scenario of Nepal's capital market, investors have shown a high level of optimism, signalled by intense participation for the last few months. Almost all of the stocks have been trading significantly higher than they were before lockdown, regardless of the short-term fluctuations. 

When we look at the current trend of public issues in the market, we see that more than 20 lakhs investors have been applying in recent issues. This is a huge number when compared to past data. Even if a quarter of this number applies to the issue of Buddha Bhumi Hydropower Limited (BBHCL), the issue will be oversubscribed. 

Since the "10 kitta rule" still holds true for this IPO, 80,000 lucky applicants will get the 10-unit shares of Buddha Bhumi Hydropower Limited. So, it is advisable to apply only for 10 units.