Listed cos on rights issue spree

Published On: September 16, 2016 01:19 AM NPT By: Republica  | @RepublicaNepal

Rs 10.55 billion worth of rights offering of 20 companies in the pipeline
KATHMANDU, Sept 16: As many as 20 companies have applied for approval of the Securities Board of Nepal (Sebon) to float 105.47 million units of new shares through rights issue.

According to the Sebon, 17 banks and financial institutions (BFIs), one hydropower company and two insurance companies have sought the capital market regulator's nod for Rs 10.55 billion worth of rights offering worth. 

Rights issue means the shares offered by a company to its existing shareholders in proportion to their holding of old shares. 

The rights issue spree comes in the wake of Nepal Rastra Bank's decision to raise the minimum paid-up capital of the BFIs by multiple times. Insurance companies are also feeling increasing pressure to shore up their capital amid preparation from the Beema Samiti, the insurance market regulator, to make amendment to the related act.

The rights issue has been one of the instruments for the listed companies to raise their paid-up capital along with distributing bonus shares, follow-on public offer (FPO), and merger and acquisition.

Out of 20 companies that have applied for the Sebon's nod, the rights issue of Api Power Company Ltd will be the biggest in terms of amount it plans to draw from the offering. The hydropower company will be floating 20 million units of shares to its shareholders to raise Rs 2 billion. Agricultural Development Bank Ltd, Machhapuchchhre Bank Ltd and Janata Bank Ltd will offer shares worth more than Rs 1 billion each if they get the go ahead from the Sebon. Each of these commercial banks will be floating 2:1 rights issue with a  plan to raise Rs 1.97 billion, Rs 1.93 billion and Rs 1.03 billion respectively. 

Similarly, Siddhartha Bank Ltd (4:1), Neco Insurance (1:1) and Himalayan Bank Ltd (7:1) are other big companies that will be raising Rs 755.52 million, Rs 324.04 million and Rs 642.74 million, respectively, through rights issue. 

Central Finance Ltd, Kamana Bikas Bank, Seti Finance Ltd, Lalitpur Finance Ltd and Nagbeli Laghubitta Bikas Bank Ltd are other listed companies who are awaiting Sebon's approval for their rights offering. Similarly, rights issue of Saptakoshi Development Bank Ltd, Sewa Bikas Bank, NMB Microfinance, Kanchan Development Bank, Kailash Bikas Bank Ltd, Kasthamandap Development Bank and Western Development Bank Ltd are also in the pipeline. 

“We are reviewing applications of some companies, while awaiting supporting documents and comments from the others. Sebon will grant the approval once we complete reviewing the applications,” Niranjaya Ghimire, deputy spokesperson of the Sebon, told Republica.

"If the companies come with all required documents, it does not take more than a week to grant approval. We have even shortened and simplified the process for the rights issue in the wake of BFIs rush to meet their deadline to raise their capital base," he added.

As BFIs have to raise their minimum paid-up capital by mid-July 2017, the Sebon has recently shortened the process of rights offering so that any delay in the process does not hit their plan to raise their capital. The Sebon has already scrapped a rule that makes credit rating mandatory for BFIs to float rights issue.

Sebon has approved the rights offering worth Rs 3.45 billion in this fiscal year 2016/17 so
far. It had given go ahead for Rs 9.4 billion worth of rights issue of 37 listed companies in 2015/16.

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