Kathmandu: Hydroelectricity Investment and Development Company Limited (HIDCL), which was established to invest in hydropower projects, reported a decline in profit in fiscal year 2025/26. However, the drop in earnings does not indicate a weakening financial foundation. Instead, the company’s substantial financial assets, bank deposits, and loans extended to hydropower projects suggest that its future income potential will largely depend on how effectively it manages and deploys its investments.
According to the company’s unaudited fourth-quarter financial statement for FY 2025/26, HIDCL posted a net profit of NPR 679.3 million. In the previous fiscal year, the company had earned a net profit of NPR 934.3 million. This represents a decline of nearly 27 percent year-on-year.
The primary reason for the decline in profit was a reduction in financial income. The company’s financial income fell from approximately NPR 1.395 billion in the previous year to NPR 991 million this year. However, total expenses also declined significantly during the same period. Therefore, the decrease in profit was not driven by rising costs but by lower returns from its income-generating investments.
The Bigger Story Lies in the Company’s Assets
By the end of the fiscal year, HIDCL’s total assets had reached NPR 28.83 billion. Of this amount, approximately NPR 12.91 billion was invested in financial instruments. The company also held NPR 13.76 billion in fixed deposits with banks, while loans extended to hydropower projects totaled NPR 8.45 billion.
This means that HIDCL’s current earnings base is not electricity sales from hydropower generation but rather returns generated from investing its capital in financial instruments, deposits, and hydropower projects.
For this reason, understanding HIDCL’s future financial position depends less on this year’s profit of NPR 679.3 million and more on how much income its NPR 28.83 billion asset base can generate in the years ahead.
EPS Declines, but Share Price Remains High
The company’s earnings per share (EPS) declined to NPR 2.73 this fiscal year, down from NPR 3.80 in the previous year. Meanwhile, its net worth per share stood at NPR 112.65.
However, the market price mentioned in the report was NPR 284.70 per share. This means the market value is roughly 2.5 times higher than the company’s net worth per share.
When compared with EPS, the market price appears even more elevated. Based on annual earnings of NPR 2.73 per share, a share price of NPR 284.70 indicates that investors are placing greater value on the company’s future prospects than on its current earnings.
Viewed another way, sustaining the current share price will require HIDCL to generate stronger and more sustainable returns not only from financial income but also from its investments in hydropower and the broader energy sector.
Will Capital Move from Fixed Deposits to Projects?
This is perhaps the most important question facing the company.
HIDCL currently holds a large amount of capital within the banking and financial system. However, returns from fixed deposits have natural limitations. By contrast, expanding debt financing and equity investments in hydropower projects could generate stronger long-term interest income and investment returns.
As a result, the future direction of both the company’s profitability and its share price is likely to depend on the pace of investment expansion and the returns generated from those investments.
As HIDCL increases lending to hydropower projects, interest income could rise. Likewise, once projects in which it has made equity investments begin operations, the company could benefit from dividends and capital gains. Such returns, however, are not immediate. Therefore, investors evaluating HIDCL should consider future investment returns alongside current EPS and net worth.
Risks and Weaknesses Remain
The company’s outlook is not entirely positive.
Net profit declined during the fiscal year, and earnings per share also fell. In addition, financial income remains highly sensitive to fluctuations in interest rates. Because a significant portion of the company’s income is derived from bank deposits and financial instruments, lower interest rates could put pressure on profitability.
For HIDCL, the challenge ahead is not simply accumulating capital but deploying that capital into projects capable of generating higher and more sustainable returns.
What Will the Stock Market Focus On?
HIDCL can no longer be viewed merely as a government-owned company operating in the hydropower sector. The gap between its market price, net worth, and EPS suggests that investors are pricing in future growth expectations.
Ultimately, the future valuation of the company will depend on two factors: how much profit it can generate and how effectively it can deploy its substantial investable capital to increase those profits.
Based on the current EPS of NPR 2.73, a share price of NPR 284.70 does not appear cheap. However, if the company succeeds in expanding investments in hydropower projects and increasing both interest and investment returns, future EPS could rise significantly from current levels. In that case, the market may view today’s seemingly high valuation differently.
For this reason, the real story of HIDCL’s stock lies not in today’s profit figures but in the returns it can generate from future investments.
Another key takeaway from the financial statements is that while HIDCL’s total assets amount to approximately NPR 28.83 billion, a large portion consists of financial assets and investments. Consequently, the most important indicator for investors will be how quickly and effectively the company can channel this capital into energy projects capable of delivering attractive returns.
Profit has declined, but HIDCL’s ability to invest has not. The question is no longer how much money HIDCL has—it is how much that money can earn.
Jalasarokar