1.     Introduction:

• Name: Arun Valley Hydropower Development Co. Ltd.
• Business: Hydropower
• Established:  B.S  2058.11.28 (as Pvt. Ltd.)
• Date of conversion into Public Limited:  B.S 2065.05.07
• Commercial Operation: B.S 2060.06.01
• Date of IPO: B.S 2066.06.25
• Installed Capacity: 3 MW
• Project name: Piluwakhola hydropower project
• Site of project: Sankhuwasabha district
• Chairman: Guru Prasad Neupane

 2.     Ownership pattern:

• Promoters: 70%
• Public: 30%

3.     List of some prominent Shareholders:

Name                                                                                    Shareholding(%)                   

• Guru Prasad Neupane
•                                                                       6.48%
• Satish Neupane                                                                                 3.97%
• Ramesh Prasad Neupane                                                                 1.17%
• Sumitra Devi Neupane                                                                     3.67%
• Jeevan Raj Shakya                                                                             6.02%
• Amarraja Tamrakar                                                                           5.25%
• Sailendra Guragain                                                                           4.20%
• Krishna Prasad paudel                                                                      3.79%
• Bhusan Guragain                                                                               2.33%
• Saurav Guragain                                                                                2.33%

 4.     Equity Fundamentals:

• Last trading price(2011.12.28): Rs. 319
• 52 Week high price: Rs. 483
• 52 Week low price:Rs. 308
• Paid up capital: Rs. 26.51362 Cr
• Market Cap.(2011.12.28): Rs. 84.58 Cr
• Market value per MW of installed capacity: Rs. 28.19 Cr
• EPS (LTM): Rs. 11.08
• P/E Ratio: 28.79
• Net worth per Share: Rs. 104.83
• Total assets value per share: Rs. 143
• No. Of promoter shareholders: 82
• No. Of public shareholding through IPO: 28,502

 5.      Bonus and Dividend history:

Year                             Bonus Share(%)         Cash Dividend(%)

2065/66                     40%                             -

2066/67                     10%                             37%

2067/68                     -                                   15% (Proposed)

6.     Company outlook:

Year                             2060/61         2065/66         2066/67         2067/68(audited)

Share Capital(Rs.):     11.68 Cr         12 Cr               24.01 Cr         26.51 Cr

Book debt(Rs.):          20.99 cr          11.77 Cr         8.21 Cr            6.235 Cr

Reserve(Rs.):              -                       10.66 Cr         5.53 Cr            0.1051 Cr*

*Proposed 15% dividend is adjusted.

7.     Future projects

Name                          Capacity         Estimated Cost          Remarks

Kabeli B-1                   25 MW           300 Cr                    51% shareholding of Ahpc,

                                                                                                DFR completed, PPA on                                                                                                       Process.

Lower Phemekhola   3.5 MW          43.60 Cr                     DFR Completed,                                                                                                                  application filed for PPA.

Upper Piluwakhola   11 MW           123.70 Cr                  16% Shareholding of Ahpc,                                                                                       PPA on Process.

Upper Khimti             12 MW           155.10 Cr                 Application filed with NEA                                                                                                   for PPA.

Note:DFS = Detailed feasibility study report. All information of these projects are based on latest published annual reports.

 8.     Key Findings:

1.      The share price of the company appears overvalued based on following facts:

Ø  P/E Ratio is higher than 25.

Ø  Price to book value ratio comes 3.04.

Ø  Total market value to cost of project comes to 2.42. (even the advantage of debt leverage to promoters isn't considered here.)

Term of licence the company would enjoy shall be 40 years starting  B.S 2057.05.05.

 3.      Based on F/Y 2055/56, the applicable PPA rate shall be Rs. 3 per unit (rainy season) and Rs. 4.24 per unit (In dry season). For next 5 years to base year, annual increment of 6% shall be applicable thenafter for rest of years during the licence period the `Consumer price index' calculated by NRB shall be taken as the reference for increment and based on the mutual understanding between the Company and the NEA.

 4.      Despite the licence stating 3MW of total installed capacity, the actual installed capacity is 3.2MW and the company pays the royalty charge based on the latter.

 5.      For last 3 years the company has been paying in excess of what it earns annually to its shareholders. This has led the value of reserve to nearly disappear from the book. This cannot be conceived as the prudent managment decision. These type of tendency signifies that the promoters are a bit myopic.

 6.      With relatively small resrve(few lakhs) and the annual EPS around Rs. 11, the investors cannot expect the better offering in the coming years.

 7.      The company claims that the Ridi hydropower development company(2.4MW) is a subsidary and operates under the managment of AHPC. However our close inspection reveals that there is a minority shareholding of AHPC in this company despite that the managment and Board composition of both the company appears almost similar.

Ø  Total no. of shareholders in Ridi hydropower = 287

Ø  Total share capital of Ridi H.P =Rs. 15.25 Cr.

Ø  Investment of AHPC in Ridi HP = Rs. 1.21 Cr.

Ø  i.e. percentage shareholding of AHPC in Ridi = 7.93%.

Ø  Proposed dividend by Ridi H.P for F/Y 2067/68 = 5.25%

 Conclusion: The investors in AHPC cannot expect good dividend income that might come to the company from Ridi H.P in future. Even out of 5.25% proposed dividend of Ridi H.P,  AHPC would be entitled to  book the dividend earning of only around Rs. 6.35 lakhs.

 8.      The promoters of this company are the key promoters of the Janta bank Limited. Even AHPC has the share investment of Rs. 4 Cr. in the abovementioned bank.