Nepse mulls new classification

KATHMANDU:

The stock exchange is seeking to classify the listed companies into four categories instead of existing elite ’A’ class and general class, so that investors can better evaluate the listed stocks.

Nepal Stock Exchange (Nepse) has proposed to introduce categories ‘G’ and ‘Z’ in the existing classification system of the listed companies, in the draft of the Listing Bylaws. At present, companies are classified as class ‘A’ representing blue chip stocks, while rest of the companies fall under general class, irrespective of their performance.

According to the proposed plan, Nepse will include only those companies that are generating continuous profit and had been distributing dividend higher than 20 per cent for last five fiscal years. Likewise, only those companies with paid-up capital higher than Rs 20 million and 1,000 plus shareholders are eligible to be considered for blue chip stock.

The ‘B’ class will comprise the companies that are doing well enough but slow on dividend distribution. Those companies that have been paying up to 10 per cent dividend — in cash and stock — for last five years will be deemed eligible for this group.

Class ‘Z’ will include those companies that are doing poorly both in terms of financials and corporate governance and keep getting into trouble with regulatory requirements. The companies that have become defunct since two fiscal years will fall in the group. Moreover, the companies that fail to provide explanation for their demotion into ‘Z’ class within three months will be liable to be delisted by the stock exchange.

Class ‘G’, standing for ‘General’, will have the companies that are newly listed and yet to be inducted into other class, according to the draft.

“Detailed categorisation will make the investors more aware about the standings of the companies so that they can assess the risk and benefits associated with the certain stock,” pointed out Raj Kumar Timilsina, president of Nepal Investors’ Forum.

“Also, it will keep pressure on the listed companies to be in the best group and improve performance to maintain good share price,” he added.

There are 130 companies listed under class ‘A’, considered top-notch scrip at present based on classification regulation as per Nepse’s Bylaws dating back to 1996. According to the existing classification, more than half of the listed 238 companies have first rate stocks.

To be inducted into elite group, the current regulation requires the listed company to be in net profit from last three years, net worth exceeding face value, minimum of Rs two million paid-up capital and be prompt with submitting annual reports.

Along with change in classification, Nepse had revised the listing fees as well. After the bylaws comes into effect following the approval of regulator — Securities Board of Nepal (Sebon) — the companies will have to pay anything between Rs 75,000 to 0.07 per cent of the issue size based on the paid-up capital. Moreover, annual listing fee that stands at Rs 50,000 at highest right now will be between Rs 50,000 and Rs 300,000.

Temporary listing provision

Nepal Stock Exchange (Nepse) has proposed temporary listing provision for the companies as a teaser to permanent listing. Nepse has introduced provision that allows the companies that fulfil listing criterion to be listed for the maximum period of two years, according to the draft copy of its Listing Bylaws.

Source: THT