Thu, Jan 25, 2018 12:43 PM
- Manil Maharjan
This is a continuation of ShareSansar’s beginners guide to share market investment. Read Part 1, Part 2 and Part 3.
Much have been told about different public offerings and the ways one can inject his/her money into share market through such investment vehicles. Now, one may have questions regarding different legal provisions which have regulated our share market so far. Securities Board of Nepal (SEBON) is one such regulator in the share market that issues different directives to regulate the market as per different circumstances. Recently, the Securities Issue and Allotment Guidelines 2074 from SEBON is one such set of instructions that all the listed companies should abide in letters and spirit.
In this part of the series, we will try to clarify some Frequently Asked Questions (FAQs) that the beginner investors generally have.
1. How can I know which all companies are issuing their IPO and FPO?
As public companies, SEBON has made it mandatory to announce their offers through the national media. You can find all relevant information such as the opening day, closing day, minimum and maximum units to apply, etc. through such media. You may also want to know more about the recent public issues via ShareSansar
2. Should I submit more than 1 share applications in my own name?
No, you should never do that. If you happen to submit more than 1 application in your name, you will be summarily disqualified from the entire application process. But if you know that the volume of application would be high and still wish to increase the probability of winning shares in lottery process, it is advisable to apply on behalf of family members through which you can apply for the shares.
3. How many days do I need to wait to know if I have been allotted shares in IPO and FPO?
As per SEBON, an issue manager is mandated to finalize the share allotment process depending on the number of applicants. From the date of closure of public issue, the issue manager is required to allot the shares by:
4. How would I know if I have been allotted with the shares?
- 30 days when the number of applicants are below 2 lakh
- 40 days when number of applicants are between 2 to 3 lakh
- 50 days when number of applicants are more than 3 lakh
On the day of allotment, the issue manager makes public the names of applicants who have been allotted the shares. With the availability of online media, one can easily get access to such information quite easily soon after the data is made public. IPO/FPO Results are also available in ShareSansar
5. If shares are allotted to me, when can I begin trading them?
In case of the shares under the quota of project affected locals and employees of promoter companies, you cannot trade your shares until 3 years from the time you have been allotted them. If you have received public shares in IPO and FPO, you will have to wait till the company gets those shares listed in NEPSE after completing all legal and practical formalities. After the shares got listed, you can expect them to be credited (added) to your Demat account around 7 days after which you can start trading them.
6. Is there any prescribed guidelines through which I can know how many shares I would possibly be allotted?
Yes, there certainly are. The securities and allotment guidelines from SEBON has made it clear that
7. When will I receive refund if I'm not allotted with shares?
- Every applicants should mandatorily get 10 unit of shares. In case of surplus shares, 10 more units should be allotted for the remaining applicants who had applied for minimum 20 units and the process continues.
- If allotting 10 unit shares doesn’t seem possible because of big volume of applicants, then the allotment has to be conducted via lottery system which must also ensure minimum 10 unit shares to the lucky lottery winners.
The issue manager is mandated to return the non-allotted amounts within 3 days of date of share allotment. These days, applying shares through ASBA system is mandatory. Therefore, you will have your amount unblocked in your bank account by 3 days by the latest.
8. How long will I need to wait for receiving the dividends?
First, the bonus shares and cash dividends are announced by the board of any company which has to be approved from Nepal Rastra Bank or respective regulatory body and the Annual General Meeting of the company itself. After receiving approval from both, you will receive cash dividends directly in your bank accounts in most cases provided that you have linked your demat account and the bank account. You will receive cash dividend quite earlier than you receive your bonus shares.
In case of bonus shares, the SEBON guidelines has mandated the companies to register the endorsed bonus shares with the board and file application with the NEPSE to list those shares within 2 months of being endorsed by the AGM. The entire process, however, appears quite cumbersome as there are many instances when the endorsed bonus shares do not get listed for months. There’s no sign of improvement in the situation until and unless SEBON comes up with new regulation clearly defining the deadline for the dividends to be credited into shareholders’ respective accounts.
9. After applying for the right shares, when will I receive them in my demat account?
Any company willing to issue right shares should apply with SEBON within 2 months of the approval of right issuance from its AGM/SGM. After necessary examinations, SEBON permits the company to float its right shares. Such a company is required to start floating those shares within 2 months of receiving approval from the SEBON. As per the guidelines, a company can keep the floating process of right shares open for minimum 35 days and may also extend the same by 2 weeks if the subscription rate is poor.
Once the deadline to apply for right shares is closed, the company further issues a notice for auctioning the unclaimed right shares if the existing shareholders don’t subscribe to them. After completion of entire auction process which still is a further cumbersome one, those shares need to wait further in pipeline to be listed in NEPSE. After their listing, you can receive them in your demat account by 7 days after which they become ready for trading.
10. What if I don’t want to subscribe the right shares but am willing to transfer the ownership of my shares so that s/he can apply the right shares?
Yes, this is absolutely possible; a process known as right renouncing. But this is possible provided that the right issuing company has made it permissible. If such is a case, then you should apply for the transfer of the right and deposit the amount of right shares before the right issue is closed.
Read Part 1
, Part 2
and Part 3
Disclaimer: Views expressed in the current series of articles are solely from the investment experiences of the author. These are not the complete pictures of investment.