May 2: Despite being in losses, the share prices of a dozen development banks and finance companies seem to be high. Generally, the share price of loss-making companies is also expected to decrease. Even though the loss-making companies have published their financial statements, the share price of some organizations seems to be rising day by day.

According to the third quarter financial statements of the current fiscal year (FY), 12 development banks and finance companies are in losses. Some of them have been running at a loss since a long time while some incurred loss for the first time.

For example, Saptakoshi Development Bank is in loss as per the financial statement of the bank for the third quarter of the current year. During the same period last year, the bank was in loss. Its earnings per share is negative and its share of bad loans is also 12.4 percent. However, when the market closed on Tuesday, its share price was Rs 338 per unit.

Pokhara Finance has a loss of Rs 17.23 million as of the third quarter of the current fiscal year. By the third quarter of last year, this finance company was in profit of Rs 35.7 million. Its latest price per share is Rs 679.

Damaru Ballabh Ghimire, an experienced investor, said that the share price of some companies that are in loss has increased abnormally due to the tendency of some investors to buy shares of companies with low capital and a small number of shares.

In the stock market, it is common for some investors to earn and others to lose. However, Ghimire says that it is necessary to consider why the share price of companies that have not been paying dividends for a long time has increased.

He suggested to the investors that the investment made in the shares of a good company is less likely to sink. He suggests that one should invest only after understanding the real situation of the company without being lured by the greed of the active groups with the aim of making profit for themselves.

Generally, the share price in the secondary market fluctuates depending on the financial health of the listed company, the profit and loss situation, the ratio of share price and earnings per share, investors’ morale, availability of liquidity in the financial system, interest rates of banks, etc.

When all these things are negative, the price has gone up, so it is considered abnormal. Experts say that recently, when investors invest in how they can get immediate benefits rather than considering the financial health of the companies.

Investor Dipendra Agarwal says that there is a tendency to invest in companies that are making loss at present  considering the prospects of those companies performing better in the future.

Recently, the increase in bad loans of banks and financial institutions has affected the income. Due to the provisioning of large amount of income, there is pressure on the profit. The financial condition of banks and financial institutions is not satisfactory due to economic recession, slow business, low demand for credit etc.

"Investors invest in institutions recognized by Nepal Rastra Bank even if they are in immediate loss, thinking that they can do well in the long run," Agarwal said.