Private sector willing to go public

HIMALAYAN NEWS SERVICE

KATHMANDU: The private sector has expressed its willingness to issue shares to the public if incentives at the policy level are lucrative enough.

“Waiving tax is not enough, private enterprises should be allowed to issue shares at a premium rate instead of face value if the regulator and financial authorities wish to increase the presence of companies belonging to the real sector in the capital market,” said vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Pradeep Jung Pandey, during an interaction organised by Securities Board of Nepal (Sebon) and FNCCI on encouraging real sector companies to enter the capital market.

“Raising funds through public issue is far more beneficial and cheaper for companies than borrowing from financial institutions in the long run, but lack of incentives along with the higher issue cost, discourages companies to go public,” he pointed out.

Moreover, different studies have shown that public companies can sustain better in the long run especially due to better corporate governance. All the real sector companies are ready to issue shares to the public, make them shareholders and mobilise their capital, but disadvantages outweigh the incentives, said immediate past president of FNCCI Kush Kumar Joshi.

“It is well known that the goodwill of public companies is far greater than that of private companies, and going public encourages transparency, but the unpleasant experience with public directors and annual general meetings are some factors most companies are not keen on facing,” he added.

Finance secretary Krishna Hari Baskota urged the private sector to guarantee the number of companies that will go public if the government provides the incentives they have been asking for. “The government has waived 10 per cent income tax for companies going public which should be incentive enough if the companies are really willing to go public,” he said, lamenting that the private sector in Nepal has also become somewhat bureaucratic.

“The absence of real sector companies in the capital market has been the bane for the overall development of the Nepali capital market, and the involvement of the productive sector in the securities market is of crucial importance,” pointed out chairman of Sebon Baburam Shrestha. “Large industries –– with capital greater than Rs 100 million –– that are doing well should all issue shares to the public,” he pointed out.

Entrepreneur Anand Todi mentioned that the failures of public limited companies belonging to the real sector in the past has discouraged existing private companies to go public, citing the example of Jyoti Spinning Mills. “Moreover, the absence of a regulator for industries discourages the public to purchase shares of real sector companies,” he added.

The capital market at present is dominated by the financial sector with more than 80 per cent of shares belonging to commercial banks, development banks, finance companies and insurance companies. Among the existing real sector companies, shares of only Nepal Telecom, three hydropower companies, Soaltee Hotel, Unilever Nepal and Bottlers Nepal are traded frequently.