Banking Khabar / Investors are beginning to feel the consequences of what critics describe as reckless IPO approvals granted under the influence of misleading financial disclosures and overly optimistic projections by financially weak companies during the tenure of former officials at the Securities Board of Nepal (SEBON).
One such company is Bandipur Cable Car and Tourism Limited financial controversy, which is now reporting mounting losses despite previously presenting ambitious profit forecasts to attract public investors ahead of its IPO issuance.
The company slipped into a net loss of Rs 16.2 million by the third quarter of the current fiscal year. Although this is slightly lower than the Rs 25.4 million loss recorded in the previous quarter, it still marks a deterioration compared to the same period last fiscal year, when the company had reported a loss of Rs 12.4 million.
What has raised serious concern among investors is the stark contrast between the company’s actual financial condition and the rosy projections it published in its IPO offer letter. Before issuing shares to the public, the company had projected that it would earn more than Rs 200 million in net profit after tax during fiscal year 2082/83. It had also claimed its total revenue would exceed Rs 550 million while total liabilities would remain around Rs 1.05 billion.
However, the company’s actual performance after raising money from the public paints an entirely different picture.
By the third quarter, the company’s total income stood at just Rs 16.6 million — far from the projected Rs 550 million target. Based on current trends, there appears to be little possibility that revenues or profits could suddenly surge to meet those ambitious forecasts within the remaining three months of the fiscal year.
The company’s core operating income has also sharply declined. Revenue generated from operations dropped from Rs 22.6 million during the same period last year to only Rs 11.6 million this year, reflecting a fall of nearly 48 percent.
Administrative expenses, meanwhile, have almost doubled compared to last year, while sales and promotional expenses have declined slightly.
Despite having paid-up capital of nearly Rs 2.83 billion, the company’s retained earnings have fallen deep into negative territory, reaching a deficit of Rs 229.3 million by the review period. Negative retained earnings generally indicate that a company has accumulated losses exceeding its historical profits, signaling prolonged financial weakness and erosion of reserves.
The company’s debt burden is also substantial. Borrowings from financial institutions alone stand close to Rs 1 billion, while total liabilities have crossed Rs 1.28 billion.
With weak revenues, growing losses, and heavy liabilities, the company reported a negative annualized earnings per share (EPS) of Rs 0.57 by the third quarter.
Despite its fragile financial condition, the company’s stock continues to trade above Rs 800 per share in the secondary market. In contrast, its net worth per share stands at only around Rs 137, while its price-to-earnings ratio has plunged into an extremely negative territory of 1,547 times — a figure many analysts may view as a sign of severe overvaluation and speculative pricing.
