KATHMANDU, Feb 13: Securities Board of Nepal (Sebon) Chairman Rewat Bahadur Karki has said that free pricing method should be introduced to bring more companies into the capital market.
Speaking at an interaction organized in capital on Friday, chairman of the capital market regulator said that the current pricing system was discouraging many companies to go for primary issue.
Currently, companies, wishing to go public, are largely required to float their primary shares at face value of Rs 100. Existing law allows only the companies, which have registered net profit for three consecutive years, to issue shares at premium price.
"If companies are given an option to float their shares in a free price system, many companies will be encouraged to float their shares and list their securities in the secondary market for trading," says Karki. He also said Sebon has proposed a provision whereby companies can float their shares at seven times higher their net worth. "The new pricing system is under consideration at the Ministry of Finance," he added.
The remarks have come amid growing complaints that Nepal Stock Exchange (Nepse) is dominated by bank and financial institutions (BFIs). Analysts say that stock market dominated by BFIs has been largely volatile due to the less representation of the real sector. Companies from real sector are reluctant to float their shares to public.
"Even a tax waiver of five percent for companies floating their shares to public has been scrapped. This does not encourage companies to come to the capital market," said Karki. "There should be a package of programs to encourage companies to go public. Such package can include restoration of five percent tax break, subsidized interest loans and other incentives," he added.
Karki also said that the companies having capital above Rs 500 million should be required to register themselves as public companies.
Also speaking at the interaction, Nepse Deputy General Manager Niranjan Phuyal said that the stock exchange company was working for modernization of the stock trading system. "Nepse is working to introduce online trading system whereby trading of securities can be carried out even through a smart phone," he added.
Dev Prakash Gupta, CEO of CDS and Clearing Ltd, said that share dematerialization service is being provided from 44 districts currently. "We will expand the service to 75 districts by July," he added.
CDS and Clearing Ltd started full-fledged dematerialized shares trading from January 17.
"With the enforcement of the central depository system, investors can get their shares in their demat account within seven days of buying shares," he added.
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