Issuer Rating Assigned by CARE Ratings Nepal

On 23 May 2025, Care Ratings Nepal Limited (CRNL) has assigned the issuer rating of ‘CARE-NP BB (Is)’ to Shiva Shankar Hydro Investment Limited (SSHIL). Issuers with this rating are considered to offer moderate risk of default regarding timely servicing of financial obligations, in Nepal.

The rating was based on a comprehensive assessment of SSHIL’s financial position, investment portfolio, operational structure, and growth potential. Further, the rating takes into consideration the market risks and regulatory risks faced by SSHIL especially with respect to regulation governing the lock-in period. The assigned rating, however, derives strength from experienced promoters and management team, debt free nature of operations and favorable exit opportunities post expiry of lock-in period.

Key Rating Strengths:

·         Experienced and resourceful promoters and management team

SSHIL has been promoted by experienced individuals who have extensive experience in diverse sectors, primarily in hydropower, banking, hospitality, construction, transportation, manufacturing and trading of commodities in Nepal.

·         Debt free financials:

As on mid- July 2025, the operations of SSHIL are debt free in nature resulting in ‘nil’ gearing ratio. Further, SSHIL has no loan or equity commitments and corporate guarantees towards any of its investees as well.

·         Favorable exit opportunities post lock-in period:

This substantial rise in stock trading volume in NEPSE post lock-in expiry underscores the liquidity and marketability of the investee shares, thereby providing the investment company with ample opportunities to realize its returns efficiently.

Key Rating Weaknesses:

·         Long gestation period of its investments:

The company's portfolio predominantly consists of operational hydropower projects which face hydrology risks and stabilization challenges typical of run-of-the-river (ROR) hydropower plants, especially in monsoon-prone Nepal. Future liquidity and returns depend on the stabilization and listing of hydropower projects, successful execution of under-construction projects, and resilience against hydrology risks.

·         Exposure to market and regulatory risk:

The three major investees of SSHIL are in the process of issuance of shares to public through IPO. Upon successful listing of these entities, SSHIL’s portfolio valuation, profitability and liquidity profile will be vulnerable to market volatility. Moreover, the company faces regulatory risks stemming from potential changes in policies by regulatory bodies such as SEBON, NRB, and the Central Government.

Despite these industry-wide risks, CARE’s rating demonstrates that SSHIL has managed to establish credibility and position itself as a promising player in the market. The company’s approach to project planning, financial discipline, and strategic growth was viewed positively during the evaluation.