The study conducted by stock market analyst Basanta Mishra found that companies not maintaining financial discipline are not willing to go public, fearing that existing promoters would lose their influence on them.[break]
The report, which was submitted to Sebon on Friday, says number of listed companies from the real sector in the stock market will increase once big private companies are coerced to go public.
According to the Department of Industry (DoI), 459 companies have paid-up capital of Rs 100 million or more. As per the existing provision, companies that complete one year of operation can float shares by making public their audited reports.
Out of 217 listed companies in Nepal Stock Exchange (Nepse), only 31 are from real sector - non financial sector. Worse still, share transaction of most of the listed real sector companies is negligible.
Given the absence of a strong mechanism to encourage big real sector companies to go public, the report has recommended Sebon to form an integrated body for the regulation of listed companies of all sectors. It also envisages guideline to ensure good corporate governance in listed companies.
Weak corporate governance, tedious process for going public and huge cost required to issue primary shares are some of the reasons discouraging big real sector companies from going public, according to the report.
“The report suggests that companies having capital of Rs 100 million or more can be coerced to go public so as to increase the presence of real sector companies in the stock market, which is heavily dominated by banks and financial institutions (BFIs),” Nabaraj Adhikari, planning and development division of Sebon, told Republica. He also said Sebon would hold a meeting on June 27 to collect suggestions from stakeholders before giving final shape to the report and make necessary recommendations for the upcoming budget.
The report, however, acknowledges that real sector companies cannot be encouraged to go public without boosting industrial activities in the country. It has also recommended the stock market regulator to put in place a strong mechanism to secure investment in the stock market.
To ensure financial transparency, the report has recommended the government to introduce corporate governance system in companies having paid-up capital of more than Rs 30 million.
There are 1,131 companies in the country whose paid-up capital ranges between Rs 30 million to Rs 100 million. Of them, 538 are from production sector, 343 from service sector, 140 from tourism sector, 79 from agriculture sector, 14 from energy sector and 10 from construction sector.
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