SEBON Forms Separate Committees to Ensure Entry of NRN Investments & To Conduct Study of Hydropower Companies Surpassing Locking Period In Capital Market

Securities Board of Nepal (SEBON) has formed two different committees with the intention of ensuring entry of investments from Non-Residential Nepalis (NRNs) living abroad and to conduct study of Hydropower companies that have surpassed locking period in the Nepali Capital Market.

A meeting of the Board of Directors of SEBON held on earlier on Chaitra 19 had decided the aforementioned.

For preparation of a draft of regulations to regulate the entry of investments from NRNs living abroad in the Nepali share market, a evaluation committee in co-ordination with representative of The Institute of Chartered Accountants of Nepal, Director Sujan Kumar Kafle has been formed.

The evaluation committee comprises of Board of Director's expert Bhola Nath Dhungana, SEBON's Executive Director Muktinath Shrestha and SEBON's  Deputy Executive Director Deepa Dahal, who is the member secretary of the committee.

The committee is responsible for formulation of the regulations and present it to the Board of Directors in three months. Similarly, the committee has been assigned to prepare procedures to tackle any obstacles in implementation of the regulations under preparation.

Similarly, SEBON has also formed another committee to study and evaluate the existing condition, share structure and impact of hydropower companies which have surpassed their locking period, in co-ordination with Phanindra Gautam, assistant secretary for the Ministry of Law, Justice and Parliamentary Affairs.

The committee constitutes of other members including Director Sujan Kumar Kafle from The Institute of Chartered Accountants of Nepal, Board's Executive Director Binay Dev Acharya and member secretary of the committee Deputy Executive Director Narayan Prasad Sharma.

The committee is responsible for studying the NEPSE listed Hydropower companies which have surpassed their locking period in accordance with Rule 38 under the Securities Registration and Issuance Regulations 2078.

In three months, the committee has to submit the reports to the Board detailing the share structure of the NEPSE-listed Hydropower companies that have surpassed their locking period and its impact.   

According to SEBON, both the committees--forged to encourage and safeguard the investment of NRNs living abroad in the secondary market and committee to study the existing condition and share structure of hydropower companies which have surpassed their locking period--will not only increase national wealth but will also strengthen the market in the long-run.

Therefore, a decision to form the committees in coordination with Director Kafle and Phanindra Gautam representing Ministry of Law, Justice and Parliamentary Affairs, was reached to formulate draft of regulations with study reports in line with the existing laws, claims SEBON.

With 72 Hydropwer companies already listed and being traded in NEPSE, and more companies in the sector that have completed it's IPO allotments and will be listed soon while others waiting due dates for their IPO issuance and numerous other applicants in SEBON's pipelines waiting for approvals for taking their company public, there has been an exponential rise in the number of NEPSE-listed Hydropower companies. Subsequently, there has been a swell in sector-specific market capitalization. 

The development while beneficial for the expansion of the energy sector and diversification  of the secondary market, at the same time raises concern as well. Moreso, the exponential rise in hydropower companies comes at a time when major banks are under pressure as in line with newer guidelines by Nepal Rastra Bank which aims to reduce the number of banks. So, in order to cement their existence banks are either merging or acquiring. 

In absence of a proper, allotted regulatory body for the hydropower companies promoters incline to the tendency of liquidating their shares prior to required time periods. Consequentially, the general public investors suffer as appropriate private supervision for the operation of hydropower projects cannot be provided.

Thus, the rise in number of hydropwer companies can also be assumed as a front for promoters to make quick money at the expense of risking public investments in the capital market. 

So, the decision by SEBON to form the committee to evaluate the hydropower companies which have surpassed locking periods is of utmost importance.