Buddha Bhumi Hydropower Limited issues IPO

Yet another IPO makes entrance into Nepali Share Market this week. Buddha Bhumi Hydrowpoer Limited which states being commited for the utilization of water resources to generate hydropower which transformed from Private company to Public company has issued shares to general public after successful allotment to project affected individuals.

Company Profile:

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%), and others.

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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. BBHCL is developing the 4.993 MW Lower Tadi Khola Hydropower project in the Nuwakot district of Province 3, Nepal.

About the Issue of IPO of Buddha Bhumi Hydropower :

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.

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Every IPO before issuance is rated by rating agency which disects the overall situation of the company What are the findings and ratings made by ICRA Nepal is presented below. 

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)

So, the quesstion raised is How much to apply for the IPO of Budhha Bhumi Hydropwer Limited?

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.

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Why You should never miss any IPO 

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