DATA COMPILATION: Nepal's Hydropower Lock-In Period

Sun, Sep 10, 2023 10:56 AM on Others, Exclusive,

A lock-in period is a predetermined duration during which investors are restricted from selling, transferring, or disposing of their shares or assets in a company or investment. This period is typically established by a contractual agreement or regulatory requirement and is designed to promote stability, discourage short-term trading, and align the interests of investors with the long-term success of the company or investment.

In Nepal, there is a lock-in period of 3 years on NEPSE only sectors like hydro, investment, manufacturing & processing, and hotels following the initial public offering (IPO) allotment to the general public. During this lock-in period, in the case of hydro and manufacturing & processing, the unit shares held by the project-affected locals and promoters are locked in for the said tenure. Meanwhile, in the case of the investment and hotel sector, as there is no reservation while issuing IPO for locals, only promoter shareholdings are locked in. Shareholders are typically restricted from selling or transferring their shares. The enduring lock-in period mandates that main promoters and early investors maintain their shares for three years after the IPO allotment to the general public.

This measure ensures that key stakeholders remain committed to the sustained growth and prosperity of enterprises listed on the Nepal Stock Exchange.

Notably, companies listed on the Nepal Stock Exchange have the flexibility to provide dividends to shareholders as early as the first year following their listing, contingent on the company's profitability. 

The regulatory authorities in Nepal affirm that the combination of the 3-year lock-in period and the option for early dividend distribution effectively balances the interests of investors while fortifying market stability. By ensuring that main promoters maintain their shares during the initial phase, the risk of rapid share sell-offs during challenging market conditions is mitigated, safeguarding the resilience and integrity of Nepal's capital markets.

The lock-in duration of listed hydropower firms is outlined as follows:

The lock-in duration of hydropower firms that are yet to be listed in NEPSE is outlined as follows:

The Nepal Stock Exchange (NEPSE) boasts a total of 82 hydropower companies listed, with an additional 4 companies awaiting listing. Furthermore, 4 hydropower companies are actively preparing to issue their Initial Public Offering (IPO) shares to the public, while 3 others are patiently awaiting approval from the Securities Board of Nepal (SEBON) before proceeding with their IPO issuance plans after which there will be a total of 93 hydropower companies listed in NEPSE.

Among the 82 hydropower companies listed on the Nepal Stock Exchange, a significant number have reached the end of their lock-in periods. Specifically, in 2023, two companies see their lock-in periods conclude. Looking ahead, 9 more companies are set to reach their lock-in periods in 2024, followed by 16 companies in 2025, and 19 more in 2026.

Numerous hydropower companies are expected to be added to SEBON's pipeline gradually due to the absence of proper regulatory guidelines. This influx of companies into the stock market could potentially pose a risk to the overall hydropower sector. It is essential to establish robust regulatory measures to ensure the sector's stability and prevent any adverse effects from this rapid expansion.