Things to know for prospective investors about IPO of United Idi Mardi and RB Hydropower Limited; IPO issue opens from today

Company Profile

United Idi Mardi and RB Hydropower Limited (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 the 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%) major promoter shareholders of the company. After the issue of the proposed IPO of Rs 105 Mn, the promoters and public holding ratio is expected to be in the ratio of 75:25.

About the issue

United IDI-Mardi and R.B. Hydropower Limited will be issuing 8,73,910 units (including 2,43,910 units unsubscribed by locals) worth Rs 8.73 crore as Initial Public Offering to the general public from (Mangsir 3-7, 2077). The early closing date of this issue is on Mangsir 7 and if the issue is not fully subscribed till Mangsir 7, then it can be extended up to Mangsir 17, 2077.

Out of the offered 8,73,910 units; 17,478 units have been set aside for the employees of the company and 43,696 units have been set aside for the mutual funds. The remaining 8,12,736 units are for the general public.

Global IME Capital Limited has been appointed as the issue manager for the IPO issue.

United-Idi Mardi and RB Hydropower Limited

Particulars

Percentage

Units

Amount

Total Capital

100%

4,200,000

420,000,000

Total Issue (including 243,910 units unsubscribed by locals)

20.80%

873,910

87,391,000

Employees

2% of IPO Units

17,478

1,747,800

Mutual Fund

5% of IPO Units

43,696

4,369,600

Public

 

812,736

81,273,600

Issue Manager

Global IME Capital Limited

   

Issue Open Date

Mangsir 03, 2077

   

Issue Closing Date (earliest)

Mangsir-07, 2077

   

Issue Closing Date (late)

Mangsir-17, 2077

   

Minimum application

10

   

Maximum application

10,000

   

Credit Rating

Care ratings Nepal 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.

Weaknesses

  • Time and cost overrun leading to an increase in the cost of project and exposure to volatile interest rates
  • Power evacuation risk
  • Hydrology risk associated with run-of-the-river power generation
  • Geological Risk

Strengths

  • Board members and management team having prior experience in the hydropower sector
  • The power purchase agreement with sufficient period coverage
  • Low project implementation risk
  • Financial closure achieved for initial project cost, however, funds yet to be tied for the cost overrun.
  • Moderate counterparty risk
  • Shortage of power in the country
  • Government support for the power sector

 (Source: 

Capital Structure:

Capital Structure

Authorized Capital

600,000,000

Issued Capital

420,000,000

Current Paid-Up Capital

315,000,000

Paid-up Capital after IPO Issue

420,000,000

 

Shareholding Structure:

 

Number of shares

Amount

Percentage

Remarks

Promoter Shareholders

3,150,000

315,000,000

75%

Already Issued

General Public (Affected area)

176,090

1,760,900

4.2%

To be issued

General Public

873,910

87,391,000

20.80%

To be issued

Total

4,200,000

420,000,000

100%

-

 

Board of Directors:

Board of Directors

Name

Position

Mr. Surya Bahadur K.C

Chairman

Mr Roshan K.C

Director

Mr. Sunil Narayan Shah

Director

Mr. Kiran K.C

Director

Mr. Vishwa Prasad Gautam

Director

Projects:

Project

Name

Upper Mardi Khola Jalavidyut Aayojana

Type

Run-of-River

Installed Capacity (MW)

7

Generation License

14/10/2073

Generation License

13/10/2108

 Financial Highlights:

Particulars

Actual

Estimated*

2073/2074

2074/2075

2075/2076

2076/2077 (Ashad End)

2077/2078

2078/2079

2079/2080

2080/2081

2081/2082

Total Paid-Up Capital ('000)

125,000.00

125,000.00

395,000.00

395,000.00

420,000

420,000

420,000

420,000

420,000

Reserve & Surplus ('000)

-3,947

-2,024

-3,824

-44,371

-9,697

19,320

17,251

25,475

44,331

Debt ('000)

0

0

0

0

975,035

896,115

837,309

773,174

703,226

Income from sale of electricity ('000)

0

0

0

105,576

197,892

203,769

209,603

295,480

221,254

Administrative Expenses ('000)

1,326

983

956

5,650

6,308

6,012

6,494

6,964

7,453

Operating Profit ('000)

1,326

2,967.00

956

93,080

176,292

181,665

186,536

191,436

196,186

Net Profit ('000)

-3,947

-2,024

-3,824

-40,847

-9,697

19,320

17,251

25,475

44,331

Earnings per share (Rs.)

-3.16

-1.62

-0.97

-10.34

-2.31

4.60

4.11

6.07

10.56

Net worth per share ('000)

96.84

98.38

99.03

88.77

97.69

104.60

104.11

106.07

110.56

Return on Assets (%)

-0.80%

-0.17%

-0.28%

-2.88%

-0.69%

1.41%

1.28%

1.97%

3.57%

Return on Equity (%)

-3.26%

-1.65%

-0.98%

-11.65%

-2.36%

4.40%

3.95%

5.72%

9.55%

Conclusion:

Hydropower is considered one of the most important sectors for the development of the economy because of its huge potential to generate electricity which can be sold to other countries benefitting the economy.

That being said, for the last few years, hydropower stocks in the stock market were not digested by the investors in the market for numerous reasons; some of them being the loss of craze for the investors in the hydropower stocks, the trend for the hydro stocks in the market was over which is why most of the stocks were trading below their par value of Rs. 100.

However, when we observe the current scenario, investors have been interested in this sector again, which is shown by the huge demand for the last few months. Almost all of the stocks have been trading above their par value signifying the high level of confidence in the sector.

When we look at the current trend of IPO in the market, we see that more than 9 lakhs investors have been applying in the recent issue’s which is a huge number when we compare it with past applicants. This shows that, even if a quarter of this number applied for the issue of United Idi Mardi and RB Hydropower Limited, the issue will be oversubscribed. So, it is advisable to apply only 10 units.