What is delaying listing of bonus shares of Nabil, Standard Chartered and more?
Fri, Apr 25, 2014 12:00 AM on Share Listed,
ShareSansar, April 24:
Investors have become ultimate victims as shares worth billions of rupees are stuck in the limbo due to procedural delay in listing bonus and right shares pledged by the companies listed in the stock market.
Only a few instances will be enough to understand gravity of the problem.
Back in December, the Annual General Meeting of Nabil Bank Limited, the leading commercial bank, had endorsed 65 percent dividend – 40 percent cash and 25 percent bonus shares—to the shareholders from a net profit of Rs 2.23 arba it posted in the last fiscal year 2069/70.
In other words Nabil owes approximately Rs 456 crore to its ordinary shareholders alone in terms of bonus shares since the price of its unit share hovers around Rs 1,900. (25 percent bonus share is worth approx. Rs 61 crore of the paid-up capital and 40 percent of it is ordinary share worth approx. Rs 25 crore as per the face value of Rs 100. If we multiply this amount with the prevailing traded price of the scrip, we arrive at approx Rs 456 crore.)
But these scrips are yet to be listed, which means that the bonus share certificates distributed by Nabil are as good as A4 size papers at this juncture.
Nabil is just a representative case. Everest Bank, Standard Chartered, you name it, bonus shares of almost all the listed companies are listed months after their AGM endorse them.
So why the delay?
Are the concerned agencies deliberately delaying it for some ulterior motive? Absolutely Not! Because no party will gain anything from the delay.
Now that the intentional delay is ruled out, we can safely conclude that it has to do with the institutional and/or procedural inefficiencies of the concerned parties.
Insofar as the rule is concerned, clause 2(A) of Chapter 4 of the Bonus Share Issuance Regulations-2067 of the Securities Board of Nepal (SEBON) stipulates that the listed company must compulsorily apply for the listing within 30 days of the decision of its Annual General Meeting to distribute the bonus shares.
The listed companies do apply within 30 days after their AGM decides to distribute the bonus shares to meet the legal provision.
“Once they apply with us for the listing of the bonus shares, the listing procedure begins,” says SEBON Spokesperson Niraj Giri. “How long it takes for the bonus shares to be listed is another aspect of listing.”
Once the listed company applies for the listing, the SEBON forwards the file to the Company Registrar’s Office, which in turn forwards it to the concerned regulators such as the central bank or the Insurance Board. Only after the regulators approve the bonus shares for listing, the concerned company will approach Nepal Stock Exchange Limited (NEPSE) to list the bonus shares for trading.
“Once the bonus shares are approved by the regulators, we usually do not take more than three days to list the shares for trading,” says NEPSE Spokesperson Niranjan Phuyal.
And the concerned company must have distributed at least 50 percent of the bonus share certificates before they could be listed.
Going by the track record, the listed company generally manages to distribute all the bonus share certificates by the time they get the final approval from the regulators to apply for the listing at the NEPSE.
Though you cannot directly point finger at anybody for the delay, the real culprit is the systemic flaw.
“The problem starts from day one,” says Prabin Raman Parajuli, Chief Executive Officer of Nabil Investment Banking Limited, the merchant banking wing and RTS of Nabil Bank. “Once the company’s AGM endorses the bonus shares, the first thing that comes to their mind is printing the bonus share certificates –millions of them.”
“As soon as the certificates from the press, the company secretary and the CEO have to individually sign each and every of the physical share certificates. And trust me, you cannot sign more than 500 certificates a day on average,” he further explains, adding that printing and signing the physical share certificates is the most time-consuming of all the steps involved in getting the scrip listed.
SEBON officials admit that.
“Initially the rule was that the concerned company had to get the bonus shares listed within 35 days of the AGM,” SEBON Spokesperson Giri said. “But then the company representatives as well as NEPSE officials complained that they simply cannot complete the listing in such a short period of time due to the procedure, especially printing and signing of the certificates.”
That explains as to why the SEBON introduced the new regulations in 2067 to ask the concerned companies to apply for the listing within 30 of their AGM – and not get it listed within 35 days.
Giri adds that the problem of delayed listing of bonus shares will be addressed once the actual dematerialization of scrip starts with the full operation of CDS.
Parajuli agrees.
“With the CDS operation, the role of the concerned companies in getting the shares listed would be immediately fast-tracked. They no longer have to print and sign the physical shares,” he says.
But he is quick to add that may not be enough to ensure prompt listing of the bonus shares.
“The regulators must work in a time-bound manner and come up with a checklist for the listing of bonus shares,” Parajuli says.
Another thing they need to think about, according to him, is set up one-window policy to process the bonus shares.
“What happens now is that the SEBON will forward the application filed by a company to one of their committees. They basically check the serial numbers of the scrip.
Then it is forwarded to the Company Registrar’s Office where they, too, do similar scrutiny,” he explains. “Very recently, they have also decided to forward it to the central bank, too!”
In the final analysis, though the physical-ness of the scrip may be overcome within the next few months, the onus still lies with the regulators to streamline the process so that ordinary share investors, who have become the ultimate victim of the delay in listing of the shares, stand to benefit.
