KATHMANDU, Jan 30: Nepal Chamber of Commerce (NCC) has urged the Securities Board of Nepal (SEBON) to restrict permitting issuance of initial public offerings (IPOs) by those companies which practice manipulation of their financial statements.
The umbrella organisation of the private sector has sought the intervention of the regulator on the matter citing the growing trend of companies in financial loss to go into public to generate huge amounts of capital from the market. Speaking at a program on Wednesday, NCC President Kamlesh Kumar Agrawal said a number of poorly performing companies have been looking forward to gathering huge money from issuing their primary shares.
Agrawal informed that the country’s share market is reeling under heavy manipulations by a number of market players. “The government needs to study minutely to safeguard the investment of the general public,” he added.
24 companies preparing to issue IPOs worth Rs 6.5 billion
Of late, many companies having negative net worths have been found issuing primary shares on the pretext of collecting capital for their growth. The promoters of such companies are in the malpractice of off-loading their shares to general people after the listing of the companies’ shares.
For almost a decade, SEBON has been encouraging the real sector firms to go public. A number of times, the regulator had even attempted to enforce necessary laws for this purpose, but failed to get the desired outcome.
Last month, the parliamentary Public Accounts Committee also issued a directive asking the SEBON not to permit companies having a net worth of less than 90 percent to issue IPOs. In recent days, the SEBON has been witnessing a notable number of applicant firms seeking the regulator’s go ahead to issue their primary shares.
Deepak Kumar Malhotra, senior vice-president of the NCC, said the SEBON must allow only those companies that are capable of distributing their dividends every year to float IPOs. “The permission for IPOs must be granted only to those companies that can guarantee at least 10 percent dividends annually to the investors.”
Sagar Dhakal, president of the Stock Brokers Association of Nepal, said the country’s share market has been adversely affected by unstable government policies. “At present, Nepali share market is being affected more by rumours than the fundamental indicators of the listed companies,” Dhakal added.
The share market is now affected by instances of insider information, circular transactions, and market cornering, which have posed significant threats to the integrity of the market. Moreover, arbitrary manipulation in share prices by vested interest groups, the spreading of false information, and poor monitoring by regulators further exacerbate the risks associated with investing.
The private sector also demanded the government to introduce new products such as bond market, short sale, intraday transactions and margin lending facilities to stock brokers in the country’s share market.
