Sebon preparing new restrictions on FPOs

Published On: May 8, 2017 09:15 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, May 7 : The Securities Board of Nepal (Sebon) is preparing to introduce restrictive measures on public companies floating further public offering (FPO). 

The capital market regulator’s new measures come in the wake of rising number of companies floating FPOs to raise funds from public. 

Sebon Chairman Rewat Bahadur Karki told Republica that the board was planning to issue a new directive to make FPO process more systematic and discourage misuse of the public offering. “By introducing new restrictive measures, Sebon wants to curb the misuse of FPO by some public companies. Many companies seemed to be floating their shares for business purpose rather than as an opportunity to raise their capital or strengthen their capacity,” said Karki said. 

He, however, did not divulge details of the measures that the Sebon is planning to introduce. 
According to Sebon officials, the regulator has decided to tighten the FPO approval process as some companies were issuing their further stocks to public almost every year. In the new directive, the Sebon will also lay down the pricing method and modality of the stocks that public companies would float on further offering, they said. 

“Public companies should do business and distribute dividend from the profit they earned from the business, not from the funds that they raise from the public,” said Karki. “Lately, a practice of boosting reserve from the funds drawn from the FPO and distributing dividend has come to our notice. So, we want to discourage that misuse of public offering,” he added. 

The Sebon has currently put application of public companies, who have sought approval for the FPO, on hold until it finalizes the issuance directive, he said. 

According to the Sebon, five listed companies are awaiting the approval of the capital market regulator to float their FPO. Premier Insurance Company Ltd (659,685 units), Shikhar Insurance Company Ltd (1.36 million units), Pokhara Finance Ltd (983,682 million units) and Butwal Power Company Ltd (4.08 million) are awaiting the regulator’s approval to launch their FPO. 

The further public issues of Nepal SBI Bank Ltd, Nepal Life Insurance Company Ltd (NLIC) and Standard Chartered Bank Nepal Ltd have drawn huge response from the public. 

Nepal SBI Bank and NLIC have already completed the allotment of their further public offerings. 

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