Rs 4b worth of securities to hit market

More and more companies are going public and issuing rights shares and corporate bonds - good news for investors and the development of the country's capital market.
The data of the Securities Board of Nepal (SEBON) shows that 22 institutions are issuing securities worth Rs 4.31 billion during the current fiscal year, which is an enormous increase from the previous fiscal year.

During fiscal 2006/07, SEBON had granted permission to varied companies to issue securities worth Rs 2.75 billion.

This year, the board has given the go-ahead to seven companies to make an initial public offering (IPO) to raise Rs 274 million.

Likewise, 14 companies have received permission to issue rights shares worth Rs 2.53 billion during the period. A single company, the Nepal Electricity Authority, has been granted permission to issue power bonds in the value of Rs 1.50 billion.

“The rise shows the growing confidence of institutions and people towards the stock market,” said a SEBON official. Following the central bank's decision to increase the paid-up capital of financial institutions by 2011, they have gone on a share issuing binge to raise money. Banks are required to expand their capital to Rs 2 billion after three years. “Almost all the permits to issue rights shares have gone to financial institutions,” said the official.

With the growing number of companies issuing rights shares, a market should be created by allowing investors to sell their rights shares, said Bijaya KC, dean of the South Asian Institute of Management. Despite the rise in the issue of rights shares, the market continues to be dominated by financial institutions.

KC said that if an investment environment is not created, other companies will not have a chance to expand. “So they do not feel the need to go public to raise funds,” he said.

Source: Kantipur