Private sector companies to be allowed to set the IPO price

Policy and Programmes of Securities Market for FY 2019/20

Kathmandu, July 15

The Securities Board of Nepal (SEBON) announced on Monday that it will start the practice of Book Building system in the share market to allow the investor company to determine the price and number of the Initial Public Offering (IPO) of shares.

SEBON announced it in the Policy and Programmes for Securities and Commodities Market for the next fiscal year 2019/20.

"This is the best international practice that allows a company to set the premium price in a competitive way," said Dr. Rewat Bahadur Karki, Chairman of the board. Large private sector companies in the country have long been demanding the Book Building System to issue their shares to the public.

In order to attract manufacture sector companies to the securities market, concessional loan will be provided to them, and facilitation would be offered to the industrial establishments of Rs. 500 million or above for the same.

The SEBON is preparing a reporting format for the real sector and hydropower companies and revising the lock-in-period (duration to restrict the promoters to sell their shares after the issue of IPO) to protect the investors interest in those sectors.

Similarly, the securities market regulator is amending the provision that allows the investors to apply for the right shares only as per the size of their shares. Investors can apply for more right shares than their part, and the policy will be implemented at the earliest.

The SEBON is issuing licenses to two commodities trading companies in the next fiscal as per the existing policy and said that it would arrange the transaction of the contracts of the local commodities in those exchanges.

The third edition of the policy and programmes, which was started from FY 2017/18, also has the provision to expand the secondary market of the securities to the districts according to the capacity of the Nepal Stock Exchange (NEPSE).

Likewise, risk-based supervision has got priority. The SEBON has announced that it would formulate bylaws for the risk-based supervision in order to check the money laundering in the capital market and transaction of securities traders, and would supervise the market as per the new instrument.

Creating profiles of mutual funds, credit rating agencies, securities brokers and listed companies, creating draft of Trust Act, implementing Insiders Trading Bylaws and developing Automated Market Surveillance System in collaboration with the regulators of the South Asian countries are other priority programmes.

The SEBON is also planning to expand the working area of the merchant bankers and securities brokers and establishing Securities, Futures Market and Financial Education Institute (SFFEI).

"Our efforts of the structural reforms in the capital market and infrastructure development and government's policy to promote the securities market will result in the development and expansion of the capital market in the country," said Dr. Karki.

According to SEBON, the total capital mobilisation in the capital market in the 11 months of the current fiscal year is about Rs. 35 billion which is about 16 per cent less than the previous fiscal's Rs. 42 billion.

Published in The Rising Nepal daily 16 July 2019.