Primary market records growth

KATHMANDU, JUNE 18: 

The secondary market’s bull run has stimulated the primary market and public offerings are being sold out in recent days. 

Primary issues had cooled down in the first half of the fiscal year as the secondary market’s benchmark —Nepse index — had settled itself comfortably over 300 points for some time. But the recent surge — post mid-April — in the stock market has aided the subscription of IPOs as well.

Of the seven financial institutions that have conducted Initial Public Offering (IPO) after the mid-April rally at Nepse, six have been subscribed within five days of the opening of the issue. 

IPOs of Janata Bank Nepal, Metro Development Bank, Kanchan Development Bank, Gulmi Bikas Bank, Pacific Development Bank and Lotus Investment Finance were subscribed within five days of opening, showing investors’ renewed confidence in the share market. 

“The price appreciation in the stock market has not only attracted investors to IPOs but also encouraged companies to issue primary shares at present,” pointed out president of Merchant Bankers Association of Nepal Bhisma Raj Chalise. “The IPO subscription rate has also been impressive lately,” he added. 

Primary market has also heated up as the capital market regulator has approved IPO worth half a billion rupees in just two months. Post mid-April Securities Board of Nepal (Sebon) has given a green signal to eight IPOs of worth Rs 468.5 million.

Last fiscal year, Sebon had approved IPO of 13 firms including one hydropower company, one insurance company and 11 financial institutions worth Rs 1.3 billion by mid-June. So far this year, Sebon has approved IPO of 13 financial institutions worth Rs 1.25 billion. 

Some IPOs before the recent bullish run faced difficulties in even getting fully subscribed and either issue managers had to extend the period of the IPO or underwriters had to buy the unsubscribed shares. With the slump in the stock market, stock prices of about 25 per cent of listed companies had slid below face value. 

“The availability of shares at prices below face value caused investors to shun IPOs as they were getting cheaper shares without any hassle at the stock market itself,” said Chalise. Moreover, the new proportionate allotment system has also become an attractive factor as it ensures all the applicants are allotted shares unlike the previous lottery system.

The proportionate allotment system designates shares to share applicants according to the proportion of the applied amount thus there is no reason for applicants to provide multiple 

applications.

Source: THT