Credit rating of listed firms mandatory to issue shares

KATHMANDU, FEB 23:

Investors will now find it easier to make decisions while buying shares of upcoming public issues as credit rating has been made mandatory.

The capital market regulator — Securities Board of Nepal (Sebon) — has made credit rating mandatory for companies planning to hold public issues exceeding Rs 30 million from now on.

According to Credit Rating Agency Regulation 2068, companies planning to issue ordinary shares, bonds, debentures, rights shares and preference shares exceeding Rs 30 million in value have to get themselves rated by a rating agency.

“Any company that has already applied for an Initial Public Offering, rights issue or debenture issue at Sebon are not obliged to get itself analysed and rated by a credit rating agency irrespective of the size,” said spokesperson of Sebon Niraj Giri.

“But companies that have yet to apply will have to be rated,” the spokesperson added.

There is only one credit rating agency in operation at present in Nepal — Icra Nepal — that got a licence in October, 2012. India’s Icra Ltd has 51 per cent stake in the rating agency while the remaining stake is held by Credit Information Bureau, Himalayan Infrastructure Fund and a few Nepali banks.

The Credit Rating Agency Regulation 2068 states that a Nepali credit rating agency needs to have a minimum of 25 per cent stake of a foreign credit rating agency.

The rest of the fiscal year will see quite huge initial public offerings of two commercial banks — Mega Bank and Century Commercial Bank — and Upper Tamakoshi Hydropower Project.

The public issue of the two commercial banks will be worth more than Rs 1.2 billion, while the hydro project will issue ordinary shares worth Rs 1.7 billion to primary beneficiaries before the end of the current fiscal year. Icra Nepal will rate these companies and investors will have a clear idea regarding the financial standing of companies and can decide whether or not to purchase shares.

Credit rating agencies rate the credit worthiness and financial soundness of an entity — individual, company or country — based on their financial indicators.

Credit ratings are supposed to be a simple yet effective indicator aiding the ordinary investor in making decisions regarding the purchase of securities.

Source: THT