Unethical business practice.

My attention was drawn by an unethical business practice done by Sahas Urja. It has published a notice on ww.sharesansar.com

It says “Sahas Urja’s Promoter Share Opens till Baishakh 15”. Further, it says “An individual can invest a minimum amount of Rs. 1 lakh (1000 shares at Rs. 100 each) whereas for corporation, the minimum and maximum investment is Rs. 5 lakhs (5000 shares at Rs. 100) and Rs. 5 crores respectively. The first installment which is 60% needs to be paid till Baishak 15, 2072.”

This Company is developing 86 MW in Solu Khola. I wonder what this Company was thinking while publishing such notice. Promoters are a group of like-minded people who take the initiative for developing a project from inception to construction on their own risk. You can not invite general people by publishing a notice to become a promoter shareholder. This is legally not allowed.

This Company is trying to cash in the positive response of general public towards the hydropower share. But there is a vast difference between promoter and public shares apart from lock-in period.

In order to invite application for public shares (IPOs), a company has to go through so many phases of compliance regulated by Securities Board of Nepal (SEBON) such as Financial Closure, acquisition of land, ICRA ratings and independent due diligence report by the issue manager.

Promoter shares cannot be offered to general public at all. It is simple as that. Firstly, it is illegal. Secondly, who knows the actual status and future prospect of this project without proper due diligence from independent parties? Remember, the seller will always claim their product to be the best in the market. But reality may be different.

A rational investor should always dig into the details. As far as this project is concerned; This Project has done the PPA but what is the guarantee of debt financing? Remember, 70 to 75% of the total project cost has to be financed by the Banks and Financial Institutions. 86 MW is quite huge for Nepalese banks. The largest project that has done financial closure by Nepalese banks is 42 MW Mistri Khola.

If self proclaimed “hydro developers” is now openly inviting the promoter shares, then I wonder there is no difference between them and the scammer like Sudhir Basnet.