Kathmandu. The IPO of Orchid Holdings (Hotel Crown Imperial) has become uncertain after the Securities Board of Nepal (SEBON) removed 13 companies with net worth of less than Rs 90 per share from the initial share issue (IPO) waiting list.
Orchid Holdings, which operates a four-star hotel in Ravi Bhawan, has a net worth of less than Rs 90 per share. The company has been in curring losses since its inception.
The company has not been able to earn profit from the hotel due to the pressure of interest expenses and bank loans. It usually takes 8 to 10 years for any four or five-star hotel to make a profit by withdrawing the investment as it takes a huge investment at the initial stage and the operating cost is also high.
Wasted issuer rating expenses
With a total of 131 rooms, the orchid holdings was built at an investment of about Rs 1 billion. Five years after the hotel came into operation, its directors had applied to the Securities Board with a proposal to issue an IPO worth Rs 1.10 billion at a face value of Rs 100 per share with a plan to raise 30 percent of the paid-up capital. With the rejection of the application, the cost incurred for its issue rating is going to be wasted. Before issuing shares to the general public, a company has to compulsorily get a rating from a rating agency recognized by the Securities Board to test its financial strength.
Stuck planning to add infrastructure
Sebon’s decision also threatens to push back plans to rebuild the banquet hall at the hotel. The banquet hall on the fourth floor of the hotel will be doubled and the pre-event area will be widened. Asian Life Insurance is the main promoter of this hotel. Sebon has not removed the five-star hotel Akama (Dhumbarahi), which came into operation at around the same time with the investment of Sanima Group. Hotel Mountain Glory Forest Resort in Pokhara, which is invested by Asian Life, has not been removed from the pipeline by the Securities Board.
Bank debt reduction plan
The securities board’s decision has dashed Arking Holdings’ plan to reduce the burden of bank loans from the ipo proceeds and make the hotel profitable. According to the hotel’s staff, although the income from the sale of hotel rooms and the hospitality of formal meetings has increased in recent times, it has not been able to make profit yet.
Such is the financial state of the hotel
According to a press release issued by CARE Ratings Nepal in March 2025, the total operating income of Orchid Holdings is fiscal year 2079. From Rs 122 million in fiscal year 2080. It has increased by 32 percent to Rs 161 million. There has been a major increase in revenue due to improvement in sales from meetings, incentives, conferences and exhibitions.
fiscal year 2019. From 21.36 percent in FY80 to FY 2080. The occupancy rate has also improved to 37.04 per cent. Despite the increase in income, the company’s profit before tax and depreciation deduction has come down to Rs 110 million. In the last financial year, its profit margin before tax and depreciation was only 7.12 percent.
fiscal year 2019. The company’s net loss fell to Rs 131 million in the last fiscal year from Rs 218 million due to high interest expenses of Rs 130 million in 1980. The company’s capital structure stood at 1.56 per cent in the previous fiscal year, while the overall gearing ratio had increased to 2.28 times at the end of the last fiscal. This refers to the decline in the company’s net worth.
In the last fiscal year, its interest expenditure was only Rs 186 million.
What is net worth?
The net worth of a company is the sum of the paid-up capital and reserves of a company. The net worth per share of the company is the net worth or book value of the shares obtained by dividing the total number of shares of the company. Net worth can also be understood as the balance left over when the total liability is reduced from the total assets of the company.
