SEBON approves 1:1 right offer of Sanima Mai Hydropower; assigned IPO Grade 3 rating

Securities Board of Nepal (SEBON) has provided approval to Sanima Mai Hydropower Limited (SHPC) for the issuance of 1:1 (100%) right shares. SHPC will now be floating 1,05,50,000 units shares each worth Rs 100 to its existing shareholders. Sunrise Capital Limited has been appointed as the issue manager. ICRA Nepal, Nepal's only credit rating agency, has assigned  [ICRANP] IPO Grade 3 to this right offer, indicating average fundamentals. As per ICRA Nepal, the assigned grading factors in good financial profile of SHPC which owns and operates 22 MW Mai Hydroelectric plant and 7 MW Mai cascade hydroelectric plant in eastern Nepal. The projects have a firm Power Purchase Agreement (PPA) with Nepal Electricity Authority (NEA) which eliminates offtake and tariff risk. Healthy revenue streams from the project are likely to support the incremental returns to the shareholders. The grading also factors in the strong promoter profile of SHPC and experienced management team with prior experience in hydropower development and operation. However, the grading is hampered by early stages of development of the projects wherein the proceeds from rights issue are to be invested. This is likely to result in diluted returns to SHPC shareholders over medium term. Hydro power development entails several execution challenges such as difficult terrain, adverse climatic conditions and weak geology exposing the projects to the risks of cost and time overrun. SHPC has earned net profit of Rs 26.05 crore in the third quarter of FY 2073/74. Its current paid up capital remains at Rs 1.05 arba. After the issuance of 100% right share, its paid up capital will reach Rs 2.11 arba.