IPO Analysis : Rairang Hydropower Development Company

Company Overview

Registered as a private limited company in 2nd Baisakh, 2059 and then transformed into a public company in 20th Baisakh, 2071 , Rairang hydropower has its registered office in Kathmandu-11, Thapathali. This company has the hydropower centre in Paachthar district of mechi zone.

The company has 500 KW Rairang Hydropower Project, 9900 KW Ewakhola Hydropower Project under its umbrella. The company took a loan of 104 crores for the construction of Ewakhola Project, on falgun,2071.

The main purpose of the public issue is to manage the fund for the 9.9 MW Ewakhola Project.

 

Company Name	Rairang Hydropower Development Company
Total Issue Units	8,40,000
Units for General Public	7,64,,400
Minimum Units to be Applied	50
Maximum Units to be Applied	4,200
Issue Open	2075/01/31
Issue Close (On Early)	2075/02/03
Issue Close (Late)	2075/02/29
Units for Mutual Funds	42,000
Units For Employees	33,600
Issue Manager	NIBL ACE Capital Limited

 

Capital Structure

Particulars	Amount
Authorized Capital	Rs 100 crores
Issued Capital	Rs 56 crores
Paid-up Capital	Rs 56 crores (after IPO)

Out of the total Capital, 75% i.e. 42 lakh units is held by the promoters. Similarly, 15% is held by the project affected people. The remaining 10% of the total issued capital will be held by general public, including Company’s staffs and mutual funds.

 

Key Positions:

• Chairman                             : Mr. Shiv Ratan Sharda

• Managing Director / CEO : Mr. Guru Prasad Neupane

• Director                                : Mr. Ramesh Prasad Neuapne

• Director                                : Mr. Wacha Raj Tated

• Director                                : Mr. Kuber Mani Nepal

 

Paid-up Capital

At the time of transformation into a public company in 2071/72, the company had a paid-up capital of merely 3.15 crore. This remained the same for the next year. However, capital was raised to 42 crores in 2073/74. After the IPO issue, the paid-up capital of the company will surge to Rs 56 crores. The company currently have no plans to further increase the capital in next couple of years.

In terms of reserve, the account was negative for the last 3 years. As of 2073/74, the reserve was Rs 1.07 crores negative. The company however expects a positive reserve in the coming days. Rairang Hydropower projects the reserve to be Rs 65 lakh at the end of 2074/75. The company further aims to amplify it to Rs 26 crores by 2076/77.

Operating Profit and Gross Profit

Gross Income is considered to be a primary source of income for hydropower and contributes a major portion of Operating Income. Increasing trend of both operating income and Gross Income is considered as a good sign for a company. Gross Income is the income earned by selling the electricity and deducting the royalty expense. There was no income from Ewakhola as of now, but the project is expected to generate income from this year and thus the company expects a rise in income in the coming years.  

The company had earned 29 lakh as operating Profit and 39 lakh as Gross income in the year 2074/75. The company however expects to increase the gross profit to 32.76 crores by the year 2076/77.

 

Net Profit

Net profit is the income after deducting every kind of operating and non-operating expenses. Higher the Net profit, the better it is. The success of a company is generally measured in terms of net profit. Some portion of this income moves to the reserve whereas some is distributed amongst the shareholders. Thus, this is one among the major parameters that concerns an investor. An investor can expect a dividend based on how much the company has earned.

The company had earned a net profit of merely 4.8 lakh in the year 2071/72. Similarly it was 3.5 lakh in the year 2073/74. With the increase in income, the company projects a rise in net profit. The company expect to earn 1.72 crores in 2074/75 and increase it to 13.18 crores by 2076/77.

One can apply for this public issue filling the ASBA form from any ASBA member company or easily apply online using meroshare.

Key Indicators (Expected 2074/75)

Particulars	Amount
Earning per Share	3.08
Networth Per Share	101.16
Return on Earnings	3.08%
Avg growth in Revenue	891.55%
Avg growth in Expenses	962.89%
Avg growth in Net Profit	4762.55%

 

Takeaway

Analyzing the company’s fundamental performance in the past, the company looks below average. Moreover, the shares of hydropower companies aren’t valued very high in the secondary market. If we see the trend, the hydropower companies are traded at around 3 times their book value. Thus, the opening price range of the company will probably be between Rs 98 to Rs 292.

However, the minimum application units just being 50, one can and should invest for not more than 50 units. As “minimum 10 unit allotment rule” will be applicable, one’s investment can easily get doubled, if allotted with shares. If projections are to be believed, the company will have a per share earnings of more than Rs 20 in the next couple of years. So, a good dividend can be expected thereafter.

The issue may not be attractive for the big investors as applicants may not receive more than 10 units. The public issue can be lucrative for beginners who are looking for opportunity to enter the share market. Investors wanting to diversify their portfolio should also apply for the IPO.