CEO of HIDCL urges investors to research and analyze before investing through IPO

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    Deepak Rauniar is the Chief Executive Officer (CEO) of Hydroelectricity Investment and Development Company Ltd (HIDCL). HIDCL has announced Initial Public Offering worth Rs 2 arba to be floated from Kartik 12, 2072. ShareSansar team met with Mr. Rauniar to discuss about the IPO of HIDCL and the company in general.

    Mr. Rauniar has more than eighteen years of professional experience in Nepal and abroad. He was the Deputy Chief Officer at Employee Provident Fund, Nepal and was a member of BOD at Clean Energy Development Bank Ltd. since 2008.Mr. Rauniar holds a Master of Business Administration -Executive degree from Pokhara University (Ace College of Management), Nepal and a Master of Computing (Research) degree from Monsah University, Australia. He also holds a Bachelor of Engineering degree in Computer Science and Engineering degree from BUET, Bangladesh.

    1. Please, tell us about Hydroelectricity Investment and Development Company Ltd.

    Hydroelectricity Investment and Development Company Ltd. (HIDCL) was established on 11th July 2011 as a specialized  development  financial  institution  to  mobilize  resources and cater  to  the  needs  of investments  in  hydroelectricity  generation,  transmission  and  distribution  projects.

    The company has authorized capital of Rs 50 Billion, issued capital of Rs 10 billion and paid up capital of Rs.8 billion (before IPO) The company intends to invest its funds through debt or equity exclusively in middle and mega hydro projects of 25MW and above.So  far, HIDCL has  provided  financing  commitments  to  8  hydropower  projects  with  7 other projects  being  in  various  stages  of  appraisal. It  also has a  wholly  owned  subsidiary, Remit  Hydro Ltd., which  further  plans  to invest  in  hydropower projects. HDICL also holds 14% equity in Power Transmission Company Nepal (PTCNL).

    1. What would you like to tell investors about the Initial Public offering from HIDCL?

    Our company has offered IPO worth Rs 2 billion.I would like to request all the investors to research about HIDCL before they apply for IPO so that they can make informed decision. It would not be a great idea just to apply on whim or looking at the queue of people applying for it. The company should not be judged by the times it is oversubscribed in the IPO but the strategic plan and the fundamentals it has.

    Our company is an infrastructure development company dedicated to finance hydropower projects in Nepal. Our company might not be able to give immediate returns to investors like Banking, Insurance and other sectors. However, it is a great opportunity for the long term investors. We expect to give good returns to the investors in the medium and long term.

    1. An investor can apply the maximum of 50 lakh units in the IPO of HIDCL. There are fears that small investors are being sidelined. What is your take on this?

    There are clear and transparent rules in place that ensure the participation of all investors large or small. There are allotment procedures set in place(at SEBON) to ensure the proper allocation of shares to the applicants.

    We are hoping to attract institutional investors who can invest with us for a long period of time. However, we are not in any way trying to discourage small (retail) investors. Small investors should not be concerned that they will be marginalized. Like any other IPO, the small investor will definitely get their fair share through this IPO.

    1. Will the shares be issued in DEMAT or paper certificate?

    At present we are holding discussions with our issue managers regarding the dematerialization of our IPO shares. In order to free the investors of hassles pertaining to the dematerialization of physical shares, we are working to issue them in DEMAT form. Additionally, issuing shares in dematerialized form will be cost effective to the company. However, it is too early to tell whether we will issue shares in paper or dematerialized form.

    1. What time line do you have for the allotment of IPO, refund, distribution of certificates and listing the shares in NEPSE?

    These issues are already defined in our existing laws. The allotment of IPO will happen within 60 days from the closure of IPO. Then, the refund would be made, if any, within the 5 days of allotment. Then,we will distribute and list the shares accordingly. If shares are dematerialized then the distribution and listing of shares would happen accordingly.

    1. The timing of the IPO of HIDCL does not seem to be investor friendly. Many people spend cash on the upcoming festivals of Dashain, Tihar and Chhat rather than on IPO. It shows HIDCL’s IPO offer is not well timed. What do you have to say about it?

    We have to issue the IPO within 60 days of approval from SEBON. If we are unable to issue IPO in this time frame, then we have to apply for the approval again. It took us approximately one and half years to get this approval. Studying all the available dates for us to offer IPO we have decided that offering IPO from Kartik 12 is the best option for us and investors.

    1. The collection center for IPO of HIDCL is located in 16 districts only. Do you think HIDCL could have more collection centers to include more people from 75 districts?

    We have allocated the largest number of collection centers in the history of IPOs in Nepal. Furthermore, the banks who have been designated as collection centers would mobilize all their possible branches to act as proxy collection centers. So, this should include people from more than 16 districts.

    1. What kind of dividend can an investor expect from HIDCL on a long run?

    I think it is too early to predict the returns as we are just offering IPO. The investors should not expect any handsome returns immediately as we have to invest the money before we can generate revenue to support dividend. Furthermore, dividends, when offered, can be right shares or bonus shares or cash dividends or combinations of any.

    1. As of now HIDCL has only committed RS 3.23 billion for investment. It has Rs 4.77 billion on hand. So, why is this company interested to collect more cash through IPO although it has pile of cash on hand?

    It is standard practice all over the world for infrastructure companies like ours to hold large sums of cash. The main reason behind this is that big projects are not viable without the financing from banks. The banks should be confident that the company is actually capable (financially) to carry out such projects at large scale. The large cash on hand gives confidence to the banks to invest on huge projects.

    1. One of the hurdles we have seen in the hydropower projects in Nepal is acquisition of land for developing transmission line. The projects financed by HIDCL are not immune from this issue. How do you expect to resolve this issue?

    We are financer of the projects. The management and development of transmission line is the jurisdiction of developers and Nepal Electricity Authority. We do not want to interfere on their job. However, we can act as a facilitator at the policy making level between Government of Nepal and the developers regarding the issues they might have faced.

    1. The company’s staff expenses have been increasing by quite an extent in the past few years. The projected staff expenses doubles in the fiscal year 2072/73. There is steady increment in the staff expenses till the fiscal year 2074/75. What is the main reason for this increment?

    HIDCL is a relatively young company. There are just 6 or 7 employees in the company and this company is not supposed to be a very big company. And most of our employees have a performance contract, they are not permanent employees.

    We are in the process of building our human resource. The staff expenses may seem to be increasing by huge percentages but in absolute amounts the spending is still quite low. We can translate the increasing staff expenses as a sign that the company is actually growing.

    Source : ShareSansar