Today is the last day to bid for AHPC share auction. But what is the right price?

ShareSansar, June 6:

Today is the last day to bid for the auction of promoter and ordinary shares of Arun Valley Hydropower Development Company Limited (AHPC)  that remained unclaimed following the 1:1 right issue floated back in March and April.

Global IME Capital Limited at Jamal is the issue manager.

The applicants must bid for a minimum of 100 units and maximum of 5,000 units and must bid for more than Rs 100 per unit, according to the company.

Altogether 1,49,918 units of shares -- 25,460 units of promoter share and 1,24,458 units of ordinary shares --- remain unclaimed following 35.04 lakh units of rights issue floated at a face value of Rs 100.

The 1:1 right shares are likely to be listed for trading around mid-June.

So what could be the right price to quote for the share auction?

The last traded price of AHPC scrip was Rs 428 yesterday. Hence, it does not make much sense to quote above this rate.

But the investors, particularly those who have extensive experience of share auctions, and leading brokers maintain the cut-off price could be anything significantly lower than the prevailing market rate.


Lokmani Pokharel, a prominent investor who is applying for this share auction, says that the bidders are in the mood to quote a low price -- as low as Rs 300 or below -- due to several reasons such as huge volume of the share auction, and ceiling on the number of shares to be quoted, besides more IPOs, especially of the hydropower group, expected soon.


“Moreover, AHPC’s quarterly reports for the current fiscal year have not been impressive,  and the company is likely to struggle to pledge around 10 percent dividend,” he adds. “Hence to be on the safe side, one would bid at a low price, so that one doesn’t risk a big loss a few months down the line when there is pressure to square off this scrip once IPOs of bigger hydropower companies are floated.”


“One of the reasons for this is that this time around the company has placed a cap on the number of shares that could be bid,” says Dipendra Agrawal, a prominent share investor. “I think the cut-off price will be close to Rs 350.”

 
Another major investor, especially when it comes to share auction, however, believes that the cut-off price would come to the tune of Rs 400.


“The scrip has not been able to go up for a long time (except when the company had floated 1:1 right share a few months back),” he says, insisting anonymity. “Nevertheless, going by the market sentiment there a lot of investors taking a very short-term position, and book the profit for even Rs 50 per scrip.”
 

President of the Brokers’ Association Narendra Sijapati opines that the cut-off price should be around Rs 50 below the market price, though he says that it can even go up to Rs 100 below the last traded price i.e. Rs 335.  


There are a few other things to take into account while bidding for this scrip.


Back in December, ICRA Nepal had awarded Grade 3 credit rating to the rights shares.


Once the hydropower company completes the issuance of rights shares, its paid-up capital would rise to Rs 60.98 crore, up from the existing Rs 30.49 crore.


The money collected from the rights issue will go on to fund hydropower projects being constructed by AHPC, according to the company.


The projects under AHPC are Piluwakhola Hydropower Project (3MW), Ridikhola hydropower (2.4 MW), Kabeli-B1 Hydropower(25MW), Upper Piluwakhola Hydropower - (11MW), Lower Phemekhola Small Hydropower (3.5 MW) and Upper Khimtikhola Small Hydropower Project (12MW).


Among them, Piluwakhola and Ridikhola hydropower have been completed while the rest are in different stages of development.


Information related to the share auctions held over the past one year would also come handy to all those who are planning to go for the AHPC share auction as well as more of such auctions in days ahead.


Click here for the past one year auction list.