The inconsiderate approval of right issue has not only increased share supply but also has negatively affected stock prices in the secondary market.
Recently, a hotcake of hydropower companies, Upper Tamakoshi Hydropower issued 1:1 right shares. Before book close, the stock was trading at Rs 386 per unit. Its last trading price came down to Rs 255 on the first transaction day but has not been able to meet the previous price. The price once climbed to Rs 248 at the end of the auction timeline, however, it came down Rs 200 afterwards.
When the right shares were transferred to Demat Accounts, the stock hit a negative circuit, trading at Rs 183. Nowadays, the stock is trading between Rs 160-170 price range. The paid-up capital of Upper Tamakoshi has reached Rs 21.18 billion after the right issue.
The capital is equivalent to that of some commercial banks operating in the country. Just like commercial banks, failure to raise demand with an increase in the supply of shares restricted the share price to reach the previous high. Once the stock price of Upper Tamakoshi had hit Rs 1,000 per unit.
Lately, companies issuing initial public offering (IPO) and right shares have increased drastically. It has dumped an enormous number of shares in the domestic stock market. Consequently, the stock market has remained stagnant for the last two years.
Recently, Ghalemdi Hydro issued 2:1, Singati Hydro issued 1:1, Arun Valley Hydro issued 1:1 and Ridi Power Company issued 1:0.5 right shares.
The stock price of Singati Hydro gained 10 percent before book close for the right issue to register last trading price of Rs 305. After book close, the stock opened trading at Rs 206. After hitting circuits in two days, the stock logged its last trading price of Rs 251.
Although the shares of Singati Hydro have not been listed in NEPSE yet, the stock is being traded at Rs 180-190 per unit. Once the shares are listed, the price will surely come down. The company also auctioning unsold right shares to the public soon.
Likewise, Ridi Power issued 50 percent right shares to the general public. Before book close, the stock was traded at Rs 275. Although the stock opened trading at Rs 221 after book close, it is currently trading at Rs 175- Rs 180 per unit.
