Case Study 6 — An IPO Analysis

First published 26 Aug 2026 · Last verified 29 Aug 2026

Case Study 6 — An IPO Analysis

Rukmini Thapa was thirty-one years old, worked as a billing officer at a private hospital in Kathmandu, and had been reading the Canon for eight months. She had a NEPSE demat account, a MeroShare login she actually remembered the password to, and just under two lakh rupees sitting in a savings account earning almost nothing. A lakh, if you have not met the word yet, is the standard South Asian counting unit for one hundred thousand — so two lakh means two hundred thousand rupees. She had read the chapters on valuation, on the Canon Score, on diversification. What she had never actually done was apply for an IPO with her own money and follow it all the way through — application, allotment, listing day, and the year after. This chapter follows her through a real one: Bikash Hydropower Company Limited, ticker BHCL, which opened its public share offering in July 2025 and listed on the Nepal Stock Exchange the following month.

We are choosing a real, ordinary IPO on purpose, not a spectacular one. Most of what happens to most Nepali retail investors happens in IPOs exactly like this: a small hydropower company nobody outside the sector had heard of, an offer document nobody read closely, a subscription period that closed oversubscribed by many multiples, and a listing day that made headlines for an afternoon and was forgotten by the next earnings season. If you understand how to think about this one, you can think about the next one, whatever sector it comes from.

Lesson 88.1 — The Company on the Table

Bikash Hydropower Company Limited owns and operates the Upper Machhakhola Small Hydropower Project, a run-of-river plant with an installed capacity of 4.55 megawatts, located in Gorkha district. A run-of-river plant is one that generates electricity from the natural flow of a river, without a large dam or reservoir behind it — think of it as a mill wheel turned by a stream rather than a bathtub that stores water and releases it on command. That distinction matters enormously for how much power the plant produces in different seasons, and we will come back to it.

For scale, 4.55 megawatts is small even by Nepal's hydropower standards. Nepal's largest operating plants, like Upper Tamakoshi, generate in the hundreds of megawatts. A 4.55 MW plant is closer to a single large diesel generator than to a national power station. That is not necessarily bad — small run-of-river projects are common, cheaper to build, and faster to bring online — but it means BHCL is, in effect, a single-asset company. There is one plant, one river, one set of turbines. If that river floods, or that plant needs unplanned repairs, there is no second plant quietly picking up the slack.

Like almost every hydropower company listed on NEPSE, BHCL sells its electricity to a single buyer: the Nepal Electricity Authority, or NEA, the state-owned utility that owns Nepal's transmission grid and is, for practical purposes, the only wholesale buyer of electricity in the country. This relationship is formalised in a Power Purchase Agreement, or PPA — a long-term contract that fixes the price NEA will pay per unit of electricity, usually for fifteen to twenty years, often with a lower tariff for the monsoon season (when rivers run high and every plant is producing) and a higher tariff for the dry season (when rivers run low and power is scarcer). This is the backbone of the hydropower investment story in Nepal: unlike a garment factory or a trading company, whose revenue depends on customers who might not show up, a hydropower company's revenue is substantially locked in by contract before a single unit of electricity is sold. That is a real strength. It is also, as we will see, not the same thing as a guarantee.

BHCL brought 2,942,760 units to the general public in its IPO — in plain terms, just under 2.95 million shares. Nepali share prices are quoted per unit of Rs 100 face value, called the par value, and BHCL's IPO was priced exactly at par: Rs 100 per share, no premium. The subscription window ran from 18 to 22 Ashadh 2082 on the Nepali calendar — 2 to 6 July 2025 in the Gregorian calendar most of this book uses. By the time it closed, the general public portion had drawn applications for 23,655,370 units — meaning investors asked for more than eight times as many shares as were on offer.

That single fact reframes almost everything about how a Nepali retail investor should think about an ordinary IPO. You are not being asked whether Rs 100 is a fair price for a share of a 4.55 MW hydropower plant — regulation has already fixed that number regardless of what the underlying business is actually worth. What you are being asked is a completely different question: is this a business you want to own once the market sets its own price for it, and is the process of getting shares worth your time and your blocked capital along the way? Chapter 14 introduced IPOs as "buying a small piece of a company before the crowd gets a chance to bid the price up or down." Chapter 77's IPO playbook built on that by insisting you never skip ordinary company analysis just because the price is fixed. Rukmini's job here was to do that analysis on BHCL before deciding whether to apply, and if so, for how much.

Lesson 88.2 — Reading the Prospectus Like a Detective

Every Nepali IPO comes with a prospectus, a legally required disclosure document that lays out the company's business, its financials, its risks, and how it plans to use the money it raises. Most retail investors never open it. Rukmini did, and she read it the way the Canon teaches: not as marketing, but as a set of clues a detective would want, because a prospectus is written by the company trying to sell you something, and your job is to read past the sales pitch to the facts underneath.

Four things mattered most for a hydropower prospectus, and they are the same four things that matter for any hydropower IPO you will meet in the years after this book is written:

First, is the plant already generating and selling power, or is it still under construction? A company that is still building has construction risk — cost overruns, contractor delays, landslide damage to access roads, disputes over land compensation with local communities. A company that is already operating and has a signed PPA has converted that construction risk into a different, calmer kind of risk: operating and hydrology risk. BHCL's Upper Machhakhola project was commissioned and generating before the IPO, which meant Rukmini was buying into an operating utility, not a construction promise. That is a meaningfully safer starting point than many hydropower IPOs on NEPSE, where investors have in the past applied for shares in projects still years from producing a single unit of power.

Second, how much debt sits on top of the equity? Hydropower plants are almost always built with a large amount of bank borrowing layered on top of shareholder capital — a debt-to-equity ratio of 70:30 or even 80:20 is common in the sector, because the plant itself, and the PPA revenue behind it, is used as collateral for project loans. This is not automatically alarming; it is how the entire industry is financed, and NRB, Nepal's central bank, has spent years shaping directed-lending rules specifically to get bank capital into hydropower. But high leverage means a large, fixed monthly interest and principal bill that has to be paid whether the river is flowing hard or running low. A dry winter that cuts output by a third does not cut the loan payment by a third.

Third, who are the promoters, and what is their track record? Nepali hydropower companies are frequently sponsored by a mix of local businesspeople, cooperative societies, and sometimes politically connected individuals in the project's home district, alongside "public and project-affected local" share allotments reserved by regulation for people living near the project. A prospectus rarely narrates a scandal, but it will list director names, other companies they are involved with, and related-party transactions if any exist. This is unglamorous, patient reading, and it is exactly the kind of homework the Canon has asked you to do since Chapter 3.

Fourth — and this is easy to skip past — what does the company plan to do with the money it is raising? An IPO that raises fresh capital to pay down expensive short-term debt or fund a second, already-permitted project is different from one that primarily lets existing promoters cash out their shares. Rukmini noted BHCL's issue was, like most hydropower IPOs, primarily aimed at broadening ownership and meeting the public shareholding requirements that come with a hydropower project's licensing conditions, rather than announcing an aggressive expansion plan.

Lesson 88.3 — Hemisphere 1: Liquidity, Governance, and Durability

Rukmini's first instinct was to reach for something she had heard called the "Canon IPO Score" from Chapter 77's IPO playbook. Rereading Chapter 77 carefully, she found this was a mistake worth naming plainly: Chapter 77 does not define anything called a Canon IPO Score. What it actually builds, in Lesson 77.4, is Rajendra Koirala's own IPO scorecard — six differently named categories (promoter and governance quality, financial strength and growth, pricing relative to sector, sector timing, use-of-proceeds clarity, and issue structure and liquidity), each weighted as a percentage of 100, used to decide one narrow thing: how large an application to submit into the lottery. That is a real and useful tool, but it answers a different question than the Canon Score does, and it is not a variant of Chapter 64's seven-dimension framework at all. The right tool for "is BHCL a good business" is the one this book has used for every other case study in this Part: Chapter 64's real Canon Score, adapted here the way Chapter 65 adapts it for hydropower generally, with Chapter 77's actual scorecard reserved for the separate, later question of how much to apply for.

Because BHCL is followed here from prospectus to a year past listing, this chapter scores the three dimensions least distorted by the IPO process itself — Liquidity & Tradability, Governance & Promoter Behaviour, and Sector & Business Model Durability — using the most recent verifiable figures, a year into trading, the same Hemisphere 1 grouping this book has used since Chapter 84.

Liquidity & Tradability (10 points). A year after listing, BHCL trades with real, checkable numbers: a 30-day average volume near 53,497 shares a day at a recent price around Rs 553 works out to roughly Rs 29 million of daily rupee turnover — solid, though short of Chapter 64's very top band. Volume: 3 out of 5. Free float is harder to pin down directly; BHCL's general-public IPO tranche of 2,942,760 units against 9,091,013 total shares outstanding today works out to about 32 percent of the company held outside the promoter and project-affected-local allotments — an estimate built from arithmetic on disclosed totals, not a directly reported free-float percentage, and disclosed as such. That sits below Chapter 64's 40-percent top-band threshold but comfortably above its bottom band — scored 3 out of 5. Liquidity & Tradability: 3 + 3 = 6 out of 10.

Governance & Promoter Behaviour (15 points). BHCL's promoter base, unlike a single dominant family group, is fragmented across several named individuals — Khagendra Neupane holding roughly 14 percent, with Krishna Prasad Ghimire, Saroj Dhital, Raj Kumar Gurung, Indra Bahadur Dhakal, and Sunil Shrestha each holding smaller stakes — a real, disclosed structure typical of a locally sponsored small hydropower project, with no pledging disclosed in the sources checked, though a verified CDSC pledging record was not independently confirmed. Promoter shareholding stability and pledging: 4 out of 6. Related-party transactions and audit opinion: no specific related-party red flag surfaced in the sources checked, and the company carries a credit rating from ICRA Nepal, which implies at least some external scrutiny of its financials — 3 out of 5. Disclosure timeliness and board independence: quarterly EPS figures have continued to be published since listing, but board independence was not separately verified — 3 out of 4. Governance & Promoter Behaviour: 4 + 3 + 3 = 10 out of 15.

Sector & Business Model Durability (15 points). The moat sub-component is, once again, Chapter 64's own textbook full-marks case: a licensed hydropower generator selling under a long-term power purchase agreement to the Nepal Electricity Authority — 8 out of 8. The concentration and dependency sub-component carries two layers of real risk here, not one. The first is the same single-buyer dependency on NEA that every hydropower case study in this book has flagged as the acknowledged gap between what Chapter 64 promises Chapter 65 will fix and what Chapter 65 actually delivers. The second, specific to BHCL, is that a 4.55-megawatt run-of-river plant with no reservoir is a genuinely smaller and more concentrated bet than Chilime or Api Power: it is one river, one intake, one set of turbines, generating far less electricity in the dry winter months than during the summer monsoon — often only a third to a half of peak output — with no second plant to pick up the slack if a landslide or flash flood damages the intake and canal, a real and recurring hazard for small Nepali hydropower during monsoon season. Scored more conservatively than the two-plant, larger-capacity peers in this book's other hydropower case studies: 3 out of 7. Sector & Business Model Durability: 8 + 3 = 11 out of 15.

Hemisphere 1 total: Liquidity & Tradability 6 + Governance & Promoter Behaviour 10 + Sector & Business Model Durability 11 = 27 out of 40.

Lesson 88.4 — Hemisphere 2: Profitability, Valuation, and Growth Since Listing

This is where an honest score and a hot listing-day chart pull hardest in opposite directions.

Financial Strength & Profitability (20 points). Return on equity, computed from BHCL's current trailing earnings per share of Rs 10.81 against a book value per share of Rs 112.53, works out to about 9.6 percent — inside Chapter 64's 7-to-10-percent band, scored 4 out of 8. Leverage and interest-coverage discipline is scored on the most recent independently verified figures available, from ICRA Nepal's October 2023 rating report: a project debt-to-equity structure of roughly 58:42, a total-debt-to-tangible-net-worth ratio of 1.53 times, and an interest coverage ratio of just 1.35 times — meaning operating earnings at that time barely covered the interest bill, well short of Chapter 64's thresholds. The 2025 IPO itself raised roughly Rs 294 million of fresh equity, which plausibly improved this ratio somewhat, but no updated, independently verifiable post-IPO figure could be confirmed, so this dimension is scored on the last verified data rather than an assumed improvement — 0 out of 7. Earnings quality and consistency: only a single confirmed EPS figure exists in the sources checked, with no verified multi-year trend, scored conservatively for the data gap rather than assumed to be either strong or weak — 2 out of 5. Financial Strength & Profitability: 4 + 0 + 2 = 6 out of 20.

Valuation Reasonableness (15 points). BHCL currently trades around 51.14 times trailing earnings — against a hydropower-sector average near 18.37 times, a ratio of roughly 2.78, well past Chapter 64's 1.5x ceiling for the bottom band — scored 1 out of 8. Its price-to-book ratio of about 4.91 times, checked against the broader NEPSE market's average of roughly 2.8 times (the same imprecise but disclosed benchmark used elsewhere in this Part, since no hydropower-specific book-value median could be verified), works out to a ratio of about 1.75 — again past the 1.5x ceiling — scored 1 out of 7. Valuation Reasonableness: 1 + 1 = 2 out of 15.

Growth Trajectory (15 points). No verified multi-year revenue or earnings-per-share series could be confirmed for BHCL in the sources checked for this chapter — only a single current EPS figure and a single, small, pre-IPO operating-income figure from 2023. Both sub-components are scored conservatively for this data gap rather than assumed to be either strong or weak: revenue growth 2 out of 8, earnings-per-share consistency 2 out of 7. Growth Trajectory: 2 + 2 = 4 out of 15.

Dividend & Capital Return Discipline (10 points). BHCL has not declared a dividend since listing in August 2025 — a real, disclosed absence rather than a fabricated negative, and one that may simply reflect a young, recently listed company that has not yet held the AGM cycle where a first dividend decision would appear. Chapter 64 does not permit skipping a dimension because the data is thin, so both sub-components are scored at the conservative floor this book has used throughout for a genuine absence of track record, rather than a confirmed failure to pay: consistency of payout 1 out of 6, sustainability of payout 1 out of 4. Dividend & Capital Return Discipline: 1 + 1 = 2 out of 10.

Lesson 88.5 — The Full Worked Canon Score

Summed, BHCL's real Canon Score comes to 41 out of 100 — Weak/Avoid, per Chapter 64's own bands. Governance & Promoter Behaviour scored 10 out of 15, above the 5-point floor, so the override does not separately apply; the raw arithmetic already lands the total in the same band the override exists to enforce.

This is a strikingly different number from the informal 22 out of 30 (about 73 percent) this chapter once reported — not because BHCL's business changed, but because that number was never a real Canon Score in the first place. It was a home-grown, six-category rubric that borrowed the name "Canon IPO Score" without Chapter 64's actual dimensions or Chapter 77's actual scorecard behind it. Scored honestly, on Chapter 64's real seven dimensions, BHCL is a thin, richly priced, single-asset hydropower company with a weak track record on leverage and no dividend history yet — a Weak/Avoid, not the "above-average, worth a small position" verdict the original text offered.

And yet BHCL's share price climbed to almost seven times its issue price within its first year of trading. That gap is the whole lesson of this chapter, stated as sharply as the numbers allow: why does a business that scores 41 out of 100 still draw eight times more demand than shares on offer, and still see its price run up so far above par? Because in Nepal, demand for an IPO and the quality of the underlying business, measured honestly, are only loosely connected. Hydropower dominates retail enthusiasm on NEPSE for structural reasons that have little to do with any single project's fundamentals: remittance income flowing home from Nepali workers abroad needs somewhere to go, bank deposit rates are often unattractive, and new listings of any kind are relatively rare, so each one draws a large share of the country's appetite for something new to buy. Extreme oversubscription and a strong listing-day pop tell you a great deal about near-term demand. A real, honestly scored Canon Score of 41 out of 100 tells you something different and, for anyone planning to hold rather than flip, more important: whether the plant will still be a good business to own in five years.

Lesson 88.6 — The Application: ASBA, MeroShare, and How Much to Apply For

Rukmini applied for BHCL through MeroShare, the online portal operated by CDS and Clearing Limited, the depository that holds electronic share records for every NEPSE investor. MeroShare is where a Nepali investor's demat account — the electronic record of shares they own, replacing the old paper share certificates — lives, and it is also the interface through which IPO applications are filed. To apply, an investor logs into MeroShare, selects the open IPO from a list, enters the number of units they want (in multiples of the minimum lot, which for BHCL, as for almost every ordinary Nepali IPO, was 10 units), and confirms the application against a linked bank account.

That linked bank account is where ASBA comes in. ASBA stands for Applications Supported by Blocked Amount. Instead of the full application money leaving your account the moment you apply, the bank simply blocks — freezes, but does not withdraw — the amount needed for the shares you have requested. Ten units at Rs 100 par value meant Rs 1,000 blocked, the minimum application amount, and the amount Rukmini chose to apply for. If your application is unsuccessful in the lottery, the block is lifted and the money is simply usable again, with nothing having actually left your account in the interim. If you are allotted shares, the blocked amount is debited to pay for them.

This single regulatory fact is worth sitting with, because it overturns an instinct most new investors bring from other kinds of investing: the idea that committing more capital should get you a proportionally larger result. In a flat-lottery IPO system, it does not. Rukmini had, before reading this carefully, assumed that applying for a larger amount — say, 100 units instead of 10 — would improve her chances or at least guarantee a bigger allotment if she won. Neither is true here. It would only have tied up more of her Rs 200,000 in a blocked state for the one to two weeks between application and allotment, money that could otherwise have stayed in an interest-bearing account or been used for another IPO's application window if one happened to overlap.

Rukmini's family took the extra step that a great many Nepali households take with heavily oversubscribed IPOs: her mother and her younger brother, both with their own separate demat accounts, also applied for the minimum 10 units each in BHCL. This is legal — each individual with their own citizenship-linked demat account may apply in their own name — but it is worth being honest about what it is: not investment analysis, but simply increasing the number of lottery tickets a family holds collectively, since Nepal's system permits one application per individual account rather than one per household. It is a widely used strategy, and it is also exactly why oversubscription multiples on popular Nepali IPOs run so high — much of the demand is the same pool of family capital spread across as many separate accounts as the family has.

Lesson 88.7 — Allotment Day and Listing Day: What Actually Happened

The lottery results for BHCL were published on 13 July 2025 — roughly a week after the subscription window closed. Of the three family applications, Rukmini's brother's was drawn; hers and her mother's were not. He received the flat allotment of 10 units, at a total cost of Rs 1,000, debited from his blocked ASBA amount the moment the allotment was confirmed. Rukmini's own Rs 1,000 was simply unblocked and available again the same week — no loss, no gain, just capital that had sat idle for roughly ten days.

This is worth pausing on, because it is the most common outcome of applying for a popular Nepali IPO, and new investors are frequently caught off guard by how little drama is actually involved in losing the lottery. Nothing was lost. Nothing was really risked, beyond the opportunity cost of ten days without access to Rs 1,000. The real investment decision, for the family, landed entirely on the shoulders of the one allotment that came through.

BHCL listed on NEPSE roughly five weeks later, on 19 August 2025 — the gap between allotment and listing being the ordinary administrative time it takes for share certificates to be credited to demat accounts and for NEPSE to clear the company for trading. On listing day, NEPSE set an opening price band — the range within which the very first trades of a newly listed share are allowed to occur, since there is no previous closing price to anchor a normal daily circuit band against — of Rs 97.43 to Rs 292.29. That is an unusually wide band for a first trade, running from just below the Rs 100 par value all the way up to nearly three times it, and it reflects how uncertain price discovery is for a company whose fixed IPO price told the market nothing about what buyers were actually willing to pay once shares could trade freely.

BHCL's shares traded within that band and, over the weeks that followed, the stock moved well above its Rs 100 par value, in keeping with the pattern the extreme oversubscription had already signalled. Across the twelve months after listing, BHCL's price ranged as widely as its opening band had suggested it might: a 52-week high of Rs 699 and a 52-week low of Rs 292.10, with the shares trading around Rs 553 roughly a year after listing, in August 2026. In other words, an investor who was allotted shares near par value and held through the full year saw the price climb to almost seven times its issue price at its best point (Rs 699 ÷ Rs 100 = 6.99), and nearly triple at its worst (Rs 292.10 ÷ Rs 100 = 2.92) — but also saw it fall by roughly twenty percent from its high before this book went to print.

Lesson 88.8 — The Decision and the Aftermath

Rukmini's brother faced the actual decision that mattered: what to do with 10 shares of BHCL once they hit his demat account and started trading freely. The IPO playbook from Chapter 77 gives three rules for exactly this moment, and the family had, per the practical checklist above, already talked through their intention before allotment results came out — which is precisely the point of deciding early, since it is far harder to think clearly once a number is flashing green on a screen.

The first rule is to separate the "lottery premium" from the "investment decision." An IPO allotted at a fixed, regulation-set par price and then immediately worth two, three, or more times that price on listing day has handed you a windfall that has very little to do with your skill as an analyst — it is largely a function of Nepal's par-pricing rules combined with the country's chronic retail appetite for new hydropower shares. There is nothing wrong with taking that windfall. There is something wrong with mistaking it for proof that you understand the business better than the market does.

The second rule is to decide, using the Canon Score you already calculated, what portion — if any — of your allotment you actually want to hold as an ongoing position in the underlying business, separate from the windfall. A real Canon Score of 41 out of 100 — Weak/Avoid, driven by a stretched valuation, a thin leverage track record, and no dividend history yet — argued for treating any retained shares as, at most, a token tracking-sized holding kept mainly to stay engaged with the story, not a conviction position, regardless of how exciting the listing-day chart looked.

The third rule is to act on that decision at listing, not to wait and hope for a better price later, because the family had already agreed on it in advance. Rukmini's brother sold 6 of his 10 shares on listing day, near the top half of the first-day trading range, banking a gain on roughly two-thirds of his tiny position while it was fresh. He kept the remaining 4 shares as a genuinely small, tracking-sized stake in a business whose fundamentals — an operating plant, a signed PPA, real if modest revenue visibility — he judged, using the Canon Score, to be sound enough to be worth owning in small size for the years ahead, whatever the share price did next.

A year later, with BHCL trading around Rs 553, that decision looked reasonable rather than brilliant, which is usually how good process actually feels in real time. Selling into listing-day strength captured value while the price was elevated, ahead of the roughly twenty percent pullback from the year's high. Holding a small remainder meant continuing to participate in a business the family had actually researched, at a size small enough that a bad monsoon season or an unexpected repair bill would not meaningfully damage their overall finances — and small enough to match a Canon Score that, honestly totalled, sits in the Weak/Avoid band rather than the "worth a modest position" reading the family's first, informal pass had suggested. Neither the flip nor the hold, on its own, would have been the "right" answer for every investor in this situation — what mattered was that the decision was made deliberately, in advance, using a scorecard built before anyone knew what the market price would do, rather than improvised in the excitement of a green number on listing morning.

The broader lesson sits underneath all of these numbers rather than inside any single one of them. An IPO in Nepal is really two separate exercises wearing one application form. The first is a lottery, governed by rules — flat minimum allotments, blocked-not-withdrawn ASBA funds, oversubscription multiples driven as much by family account-splitting as by genuine conviction — that have almost nothing to do with whether the underlying business is a good one. The second is an ordinary investment decision, governed by the same Canon Score discipline you would apply to any other share, that happens to arrive compressed into the single, emotionally loud afternoon of listing day. Confusing the two — treating lottery luck as investment skill, or treating a listing-day price spike as proof of business quality — is the single most common mistake retail investors make with Nepali IPOs. Keeping them separate, the way Rukmini's family did almost by accident because they had simply written their plan down in advance, is most of what separates a lucky story from a repeatable process.