Every investor entitled to 10 shares under new provision

 Lalitpur, May 28:

The Security Board of Nepal (SEBON) has implemented a new provision to allocate at least 10 units to every individual who applies for the shares in the Initial Public Offering (IPO) and Further Public Offering (FPO).

With the implementation of the new Securities Registration and Allotment Guidelines, 2017 on Sunday, every applicant will receive at least 10 units or a number multipliable by 10.

“Likewise, only individuals can apply for the IPO of any company. If the share is short-subscribed by individuals, only then companies will have a chance to apply for such shares,” said spokesperson of SEBON Niraj Giri at a press meet held at the Board’s office on Sunday.

According to him, the board has made such a provision to increase the participation of investors in the primary offerings and enhance the secondary market.

Such a provision will be implemented through the ASBA (Application Supported by Blocked Account) system. ASBA is a system through which an investor can submit his securities subscription application to the issue manager through a bank where he maintains his bank account.

Similarly, the new guidelines have provisions for calculating the premium of any company that opts for primary issuance of its shares.

Such companies have two options of calculating the premium of the shares – capitalised earning and discounted cash flow of the last three years, and average price of the shares calculated on the basis international standards or four-fold price of the shares calculated on the basis of latest auditing.

Either of these two can be set as the premium.

“The new guidelines bars companies from issuing the FPO for five years from the date it issues such an offering,” said Giri.

With the full implementation of ASBA, the duration of issuing an IPO and restarting share trading will be reduced to 2 months while it used to take about 6 months to complete all of those processes.

“Similarly, companies should open collection centres outside the Kathmandu Valley where there are investors, and start the transaction of securities within 15 days of a joint business launch after a merger,” said Giri.

The guidelines have replaced the Securities Issue Guidelines, 2008, Bonus Share Issue Guidelines, 2010, and Securities Allotment Guidelines, 2011.

Meanwhile, chairman of the Board Dr. Rewat Bahadur Karki has reiterated that the country needed a second stock exchange.

“International financial institutions are set to issue bonds in local currencies, large infrastructure projects and private sector companies are aspiring to issue large amounts of shares and the number of investors is ever increasing. Therefore, to address all these issues and make the capital market more competitive, we need a second stock exchange,” he said.