Kathmandu, Dec. 31: With the aim of making the Initial
Public Offering (IPO) more transparent and to provide investors with reliable
information, the Securities Board of Nepal (SEBON) on Sunday announced a new
provision whereby the companies announcing an IPO should mandatorily mention
financial details of at least the past three years.
According to the new provision, if the company going
for the IPO is in operation for more than three years, it should mention the
financial details of past three years, and the companies with a shorter period
of operation should mention the per share net worth and per share income as per
the audit reports.
Such details should be mentioned on the cover page of
the IPO document prepared by the company, said SEBON spokesperson Niraj Giri.
The capital market regulator has given special notice to the hydropower companies.
The hydropower companies must mention the per
megawatt production cost, remaining period of electricity production license
and pay-back period.
In addition to the financial details, the companies
issuing the IPO must mention the grade of Credit Rating of the IPO. A credit
rating agency provides grade to the IPO of equity shares or other securities,
which can be converted into or exchanged with equity shares in the future.
If the per share net worth of any company is lower
than the offered price, the company must mention it prominently in the notices.
The SEBON maintained that the financial details and
other information will inform the investors about the status of the company,
and they can make informed decisions.
The companies should also approve the financial
details from their auditors.
“Companies must mention their targets and real
financial details in their annual report. If there are any discrepancies
between the estimated and achieved details, they should mention the reasons
behind the failure to achieve the targets, and continue to do so until the
estimated targets were met,” said SEBON.
The financial details prepared for the IPO should be
posted on the official website of the company up to the target period, website
of the portfolio manager until the shares are alloted, and on the web of the ASBA
member bank and financial institutions for the offering period.
The SEBON has also made a provision for the
investors to announce that he/she read the financial details of the respective
company.
It said that Book Building Method will be implemented
in the future in order to set the realistic price of the securities through the
market.
Book building is a process by which
an underwriter attempts to determine at what price to offer an initial public
offering (IPO) based on demand from institutional investors.
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