Kathmandu, December 29
As the Securities Board of Nepal (SEBON) is preparing to introduce directives to enforce the Securities Registration and Issue Regulation, the securities market regulator sought input from the private sector on ways to lure real sector companies in the stock market to diversify the existing domination of financial
sector in the local bourse.
Welcoming the provisions of the recently amended Securities Registration and Issue Regulation, the private sector has suggested the board to reduce the time it takes to get listed in the stock market. It has also asked SEBON to enforce premium pricing and free pricing of initial public offering as provisioned by the regulation and control of information asymmetry, among others.
PashupatiMurarka, president of the Federation of Nepalese Chambers of Commerce and Industry, expressed hope that real sector companies will be attracted to go public as the threshold of shares that needs to be issued to the public to become a public limited company has been reduced to 10 per cent from 30 per cent through the current regulation and also due to the reduction in income tax by 15 per cent. The current fiscal policy for the year 2016-17 has offered 15 per cent income tax exemption for real sector companies that float shares to the public.
However, as per the provision of the regulation, companies that exploit natural resources like hydropower must allocate additional 10 per cent shares to the public, excluding the 10 per cent that has to be mandatorily issued to the locals of project affected areas.
The recently issued regulation has also paved way for international finance institutions to issue local currency bond. Once the bond is listed in the stock market, it will create ground to attract foreign individual and institutional investors in the secondary market, according to RewatBahadurKarki, chairman of SEBON.
“To develop the stock market, we must attract real sector companies and foreign investment in the share market.”
Currently, there is negligible presence of real sector companies in the country’s lone stock market. The government has amended the regulation in a bid to allow international finance institutions to issue local currency bonds and diversify the secondary market by attracting real sector companies. Karki further stressed that the government should also provide some attractive packages to real sector companies through the fiscal and monetary policies, like interest rate subsidy for public-listed companies and others.
During the interaction with SEBON, private sector players also urged it to minimise the three-year lock-in period for promoter shares.
A version of this article appears in print on December 30, 2016 of The Himalayan Times.