Most listed firms yet to dematerialise shares

KATHMANDU, JUNE 29:

The total number of listed companies that have registered shares for dematerialisation with CDS and Clearing Ltd (CDSC) has reached 12. There are still 216 companies that need to get registered by the end of the fiscal year.

Today, CDSC signed an agreement to dematerialise shares of Citizens Bank International — making it the 12th company to do so. The deal was signed to dematerialise 21.01 million unit shares so that the bank’s shareholders can get traded shares cleared and settled automatically through CDSC.

So far, among the 228 listed companies at Nepal Stock Exchange, Ace Development Bank, Agriculture Development Bank, Everest Finance, Bank of Kathmandu, Laxmi Bank, Himalayan General Insurance, Shikhar Insurance, Nepal SBI Bank, Siddhartha Insurance, Siddhartha Bank and PrimeLife Insurance have got their shares dematerialised.

The deadline for issuing companies to get their shares dematerialised by Nepal’s only central depository will be over by the end of the current fiscal year, according to CDS Regulations. However, the remaining 216 companies are unlikely to meet the deadline which is up in the next 15 days. “We have approached listed companies even in writing to come and get their shares registered, but a large number of them have assured us that they will dematerialise shares after the beginning of next fiscal year to avoid paying annual fee,” pointed out CEO of CDSC Subodh Sharma Sigdel.

“And a few have reservations on getting their shares dematerialised as their shares are rarely traded at the stock exchange,” he added.

Based on the paid up capital, the annual fees range from Rs 50,000 — the minimum rate for companies with paid up capital of up to Rs 200 million — to Rs 500,000 for companies with a paid up capital higher than Rs 10 billion. The listing fee is similar to the annual fee.

Even if all the companies get listed, it seems unlikely that shares traded will go through automated clearing and settlement. Clearing members who are indispensable for automated clearing and settlement have yet to get membership.

Likewise, the number of demat accounts at depository participants (DP) that hold dematerialised shares on behalf of the investors is 327. Only 327 investors have demat accounts from which demat shares can be debited and credited based on sales or purchase of shares.

Despite being fully equipped to undertake automated clearing and settlement of shares traded, CDSC is handicapped in the absence of clearing members who electronically transfer dematerialised shares belonging to the investors stored in demat account at DPs. So far only two broker companies have applied for the membership of clearing member at CDSC.

Brokers have objected to the necessity to keep Rs one million cash with CDSC as collateral to guarantee clearing and settlement of the shares traded. Likewise, they also want the provision of suspending a broker for one week for not being able to settle the transaction on time to be scrapped.

Source: THT