February 21: The number of companies that have applied for the initial public offering (IPO) of ordinary shares with the Securities Board of Nepal (SEBON) has reached 27. Among them, 44 per cent (12 companies) belong to the hydropower sector.

Out of the 12 hydropower companies in the pipeline, the production capacity of 10 is less than 20 MW. Currently, there has been an increase in IPO issuance by hydropower companies with small production capacity.

Mandu Hydropower, which has applied for IPO permission with SEBON, has a production capacity of 22 MW, and Modi Energy has 20 MW. Similarly, Kutheli Bukhari Small Hydropower has 0.998 MW capacity, Upper Syangja Hydropower has 2.4 MW capacity, Rawa Energy Development has 3 MW capacity, Upper Lohor Hydropower has 4 MW capacity, Bhagwati Hydropower Development has 4.5 MW capacity, Chirkhuwa Hydropower has 4.7 MW capacity and Manakamana Engineering Hydropower has 5 MW capacity.

Similarly, Three Star Hydropower has 7.151 megawatts capacity, Mid Solu Hydropower has 9.5 megawatts capacity, and Upper Mailung River Hydropower has a production capacity of 14.3 megawatts.

According to a report of Nepal Rastra Bank on the financial and economic situation of the country till the end of last December, 25.30 per cent (63 units) of the companies listed in Nepal Stock Exchange Limited (NEPSE) are hydropower. Likewise, hundreds of hydropower projects are currently under construction in Nepal.

Since hydropower companies issue IPOs to raise investment for projects, it seems that shortly, a large part of the companies listed in NEPSE will be hydropower.

Stock market experts shared that when the share of limited sector companies in the market is high, it will affect the overall market development and expansion. Currently, about 60 per cent of the listed companies in Nepal are in the banking and financial sector and insurance.

Therefore, experts claim that the entire market will be affected when there are policy changes in the banking, financial and insurance sectors.

Rohan Karki, an expert in the market and chairman of the Independent Capital Market Association, said that after the lock-in period, the promoters of the hydropower company sell their shares and take money out of the market to invest in other sectors.

Karki claimed that more hydropower companies are good for the nation as a whole, but due to the listed hydropower companies, money will go out of the market. According to Karki, this trend will have a long-term impact on the market.

“As a large number of hydropower companies are currently preparing to issue IPO, it seems that they will dominate the market shortly. It seems that when the share of limited sector companies in the market is high, it will affect the development and expansion of the overall capital market,'' he said.

Securities Board of Nepal spokesperson Muktinath Shrestha also said that companies from various sectors must come for market development and expansion. “When a large part of the market comprises of companies of a limited sector, it affects the development and expansion of the market.

Therefore, companies from various sectors must come to the market," he said. "To encourage companies from various sectors to issue IPOs, the board has started work including book building and putting SME platform into operation," Shrestha informed.

According to him, the board has also started the book-building process to encourage real sector companies in the market. Shrestha informed that the board is currently discussing continuously with the ministry how private sector companies can be encouraged to become public companies through IPO. According to Shrestha, the matter was discussed between the team, the board and high-ranking officials of the Ministry of Finance on Monday.