Series of IPOs affect Nepse's daily turnover

KATHMANDU, April 2:

With billions of rupees stuck in the Initial Public Offerings (IPOs) of different companies in the last two months, daily turnover in Nepal Stock Exchange (Nepse) is falling rapidly.

Daily turnover, which averaged at Rs 456 million last month (mid-January to mid-February), fell to Rs 122.7 million on Wednesday.

The turnover in the market started tumbling rapidly from March 12 when the market registered a total transaction amount of Rs 197.4 million, down from Rs 310.28 million on the previous trading day. Total turnover is on a declining trend since then.

Analysts and investors attribute IPOs of various public companies, which have sucked investors' money in last few weeks, to the decline in daily turnover. "People have invested billions of rupees in IPOs in the past few weeks. As large amount of investors' money is stuck in IPO subscription, the second market is seeing fall in total turnover," Shreejesh Ghimire, CEO of NMB Capital, told Republica.

An estimated Rs 30.08 billion is stuck in IPO of four different companies announced in the last two months. Over half a dozen companies, including Rapti Bheri Bikas Bank Ltd (RBBBL), Barun Hydropower Company Ltd (BHCL), Janautthan Samudayik Laghubitta Bikas Ltd (JSLBL) and Upper Tamakoshi Hydro Power Ltd (UTKHPL), had issued primary shares in the past two months. The IPO of these companies have been oversubscribed by many times.

RBBBL's IPO was oversubscribed by around 50 times drawing Rs 2.4 billion, while BHCL was oversubscribed by 98 times collecting Rs 4.8 billion from investors. Similarly, Growmore Merchant Bank -- the issue manager of JLSBL -- collected a total of Rs 2.88 billion for the primary shares worth Rs 9 million. Likewise, the primary shares of UTKHPL floated in the first phase for the depositors of the Employment Provident Fund and staffs of the lending institutions and developers, have been subscribed by around 10 times which means a total of Rs 20 billion has been collected from the subscription.

Many investors are also eying IPO of Mirmire Microfinance Development Bank, Vijaya Laghubitta and ILFCO Microfinance Bittiya Sanstha Limited.

According to Ghimire, another reason for the decline in total turnover is also due to rise in interest rates by BFIs in recent days. "Liquidity situation of BFIs seem to have come at a comfortable position. This has forced banks to increase interest rates," Ghimire said.

Stock broker Anjan Raj Poudyal also sees seasonal quarterly impact behind decline in daily turnover. "The Nepse is dong down in recent weeks. Buyers are waiting for share prices to drop further, while those looking to offload their shares are waiting for the prices to go up," he said, adding that investors are on a wait and watch mood.

Source: Republica