Despite their poor financial condition, the share prices of Janaki Finance and Sindhu Bikas Bank rose sharply on Tuesday. Both financial institutions have been struggling, with Janaki Finance reporting the highest percentage of non-performing loans (NPLs) among finance companies and Sindhu Bikas Bank facing urgent corrective action from Nepal Rastra Bank (NRB) in the last quarter of Fiscal Year (FY) 2023/24 due to its deteriorating financial health.
On Tuesday, Janaki Finance’s share price increased by 10 percent (Rs 46.60 per share), reaching Rs 512.80, while Sindhu Bikas Bank’s share price rose by 9.47 percent (Rs 107.90 per share), closing at Rs 1,246.80.
According to Nepal Stock Exchange (NEPSE), a total of 119,169 shares of Janaki Finance worth Rs 59.41 million and 141,231 shares of Sindhu Bikas Bank worth Rs 159.78 million were traded on the same day. The rise in their stock prices came as NEPSE recorded gains in 177 companies across the secondary market, while 60 companies saw a decline in their share prices.
As of the second quarter of the current fiscal year, Janaki Finance has reported a net loss of Rs 248.2 million. The company’s NPLs stand at 40.88 percent, the highest among finance companies. It has a per-share loss of Rs 71.91, while its net worth per share is only Rs 21.94.
Recently, regulatory authorities imposed a restriction on companies with a net worth below Rs 90 per share, preventing them from issuing shares to the public. Despite having a net worth of just Rs 21.94 per share, Janaki Finance’s stock continues to trade at a high price. An NRB source revealed that the company is currently under special surveillance but added that since it is not directly regulated by NRB, information about its share transactions is limited.
Sindhu Bikas Bank has also seen a significant increase in NPLs, which exceeded 9 percent in the second quarter of the current fiscal year—up from just over 1 percent in the same period of the previous fiscal year.
While the bank reported a net profit of Rs 48.7 million, its distributable profit remains negative by more than Rs 318.9 million. Sindhu’s net worth per share stands at Rs 73.61, with earnings per share (EPS) of Rs 17.47.
A senior official from the Securities Board of Nepal (SEBON) stated that despite repeated warnings for investors to consider a company’s financial health before investing, many continue to take high risks, fueling price surges in financially weak companies.
"If investors invest without conducting proper research, all we can do is pity them from afar," the official remarked. "If investors, despite witnessing the downfall of Karnali Development Bank, still choose to put their money in struggling companies, what more can regulators do?" Karnali Development Bank is currently under NRB’s control due to its financial collapse.
Senior advocate and investor Kanchan Krishna Neupane also expressed concern, stating that trading financially weak companies’ shares at inflated prices does not benefit investors in the long run. He warned that if regulatory authorities fail to investigate potential price manipulation by a small group of individuals or entities, ordinary investors could be at risk.
"It is a failure on the part of regulators if they do not investigate, even when there is clear evidence of unnatural transactions in the market," Neupane stated.
