NEPAL > Ridi Hydropower Development Company Limited and its share price speculation

The newly listed hydropower company in Nepal Stock Exchange is Ridi Hydropower Development Company Limited. Ridi Hydropower Development Company Limited owns a 2.4 MW project in Palpa district. The project is generating electricity at the moment.

After the overwhelming IPO success which was oversubscribed by 92 times, the debut price was NPR 305. Within the few days, the share price reached to NPR 336.

The investors and pundits say that the scrip will continue to rise in days to come.

“Ridi is likely to be traded at the circuit level fort four to five days,” says Dipendra Agrawal, one of the noted investors in the market. “It should eventually settle around NPR 600.”

Chairperson of the Brokers’ Association Narendra Sijapati, too, feels that Ridi will settle somewhere above NPR 600.

Stock analyst and investor Uddhav Siwakoti says that the scrip is being traded at OTC in between NPR 550 and Rs 600 at the moment.

Another prominent investor Tulsi Ram Dhakal says that as its demand is high and the shares are limited, it is likely to be eventually settle in between NPR 550 and NPR 600.

He believes that Ridi could be traded between NPR 650 to 700 as the demand is high and the supply is limited.

Another noted investor Bimal Pandey says that Ridi should eventually settled over NPR 650.

Executive Director of the company Guru Prasad Neupane claims that there is high demand for Ridi’s share in that the company is expected to make a net profit of NPR 65 million in the current fiscal year itself, which can entail a bonus share of 10 percent.

Ridi had issued the IPO at the face value of NPR 100 per unit on February 16. One of the major reasons for this speculation is because the shares have been scattered to various investors. For the first time in the history of share market of the country, the issue managers had decided to put both groups of investors under the lottery system while allotting the primary shares due to overwhelming response to the IPO under both the groups. The IPO had been tentatively allotted at 2.23 percent for the small group and 0.94 percent of the big one.

At present, it is hard to find sellers. This whole phenomenon raises me to find the optimum price by analyzing with like companies.

Nepal Stock Exchange (NEPSE) calculates the Book Net Worth while making the debut. Usually, the listing price will be three time the Book Net Worth. So by doing a basic calculation, we can assume the Book Net Worth of the Ridi hydro is around NPR. 101.67. The expected EPS for this fiscal year is 22.67. Now let’s see the indicators of like companies and compare them.

Hydro companies	Last audited EPS	Expected EPS	Share Price	P/E
Butwal Power	24		859	35.8
Chilime	55.23		2,736	49.5
Arun Valley	18		531	29.5
Ridi Hydropower		22.67

By looking at the lowest P/E that belongs to Arun Valley and multiplying it by the expected EPS of Ridi Hydropower Development Company Limited, it comes to NPR 668.77. So I think there is some truth in the speculation by Pundits. I understand that P/E stand alone will not be enough to speculate as it largely depends on the revenue stream, supply and demand, management of the company, future investment of the company and so on. But my calculation is just a rough calculation. By looking at the present scenario, I won’t be surprised if the share price stays in between NPR 550 to NPR 600 in near future.

My argument is becoming stronger day by day as I, myself, am trying hard to buy its share but no luck yet. The last traded price was NPR 336. Since then, no transaction has occurred whatsoever. Nobody is willing to sell their share which will surely increase the price as there is a strong demand for its shares.