Nepal, Ridi Hydro: Common Equity—Uncommon Enthusiasm

Abstract

Companies seeking to tap into the capital markets by issuing common equity shares to the public in Nepal were mandated by law to issue such shares at face value, typically of Nepalese rupee (NPR) 100. Such pre-money valuation ignored the windfall gains likely on listing, for, when trading in the shares commenced, they were typically priced at a substantial premium over the issue price based on post-money valuation. Hydropower stocks in Nepal offered a welcome diversification for investors in a market dominated by banking and finance companies. Marginal costs of hydrokinetic generation were negligible: the income streams were considered stable and reasonably predictable. For most part, the product (electricity) was without substitute, and the market almost unlimited, both at home in Nepal, as well as for export to neighbors viz., India and Bangladesh.

The risks are less and the returns are larger in hydropower companies compared to other sectors.

—Rabindra Bhattarai, Nepalese Stock Market Analyst

Most of these investors are from the secondary market and they invest their money with the expectations of good return in short span of time.

—Anjan Raj Poudel, Former President Stock Brokers’ Association of Nepal

The issuance of primary shares will help to change the perception that Nepal´s hydropower companies are not transparent.

—Kuber Mani Nepal, Director Ridi Hydro Power Development Company