Share issuance drops amid market slump
KATHMANDU, MAY 10 -
Issuance of initial public offerings (IPO) and rights shares has slowed down amid a prolonged downturn in the domestic capital market. According to the Securities Board of Nepal (SEBON), IPOs were down 57.14 percent during the first 10 months of the fiscal year compared to the same period last year.
Nine companies received permission to float shares worth Rs 761.03 million during the review period against 21 companies and shares worth Rs 2.12 billion previously.
Similarly, 28 companies received SEBON’s go-ahead to issue rights shares valued at Rs 5.26 billion as of April-end, down from Rs 7.18 billion worth of rights shares of 22 companies previously.
Stock analysts have attributed the drop in the issue of rights shares to fulfilment of the central bank’s requirement to raise the paid-up capital by most listed banks and financial institutions (BFIs).
“As most BFIs have already fulfilled the central bank’s requirement to increase their paid-up capital, this fiscal year saw less issuance of rights shares,” said stock analyst Rabindra Bhattarai.
Analysts said that suspension of licenses for new BFIs, a bearish market and extended liquidity crunch were the reasons behind the decrease in share issuance. “As our capital market is dominated by BFIs, Nepal Rastra Bank’s policy to tighten the entrance of new BFIs has hit the volume of share issuance,” said Acharya.
Among the 28 companies approved by SEBON to offer rights shares in 2010-11, Sanima Bikas Bank’s planned issue is the largest at Rs 1.209 billion. Sanima plans to upgrade to an A class commercial bank.
Meanwhile, market experts have expressed surprise that rights share issues were undersubscribed this year. A number of BFIs who had issued rights shares to increase their paid-up capital had a hard time finding takers.
According to Bhattarai, recent cases of bad corporate governance also discouraged investors from subscribing to rights shares. “A hike in bank interest rates has turned off potential investors,” said Bhattarai.
Source: Kantipur
Issuance of initial public offerings (IPO) and rights shares has slowed down amid a prolonged downturn in the domestic capital market. According to the Securities Board of Nepal (SEBON), IPOs were down 57.14 percent during the first 10 months of the fiscal year compared to the same period last year.
Nine companies received permission to float shares worth Rs 761.03 million during the review period against 21 companies and shares worth Rs 2.12 billion previously.
Similarly, 28 companies received SEBON’s go-ahead to issue rights shares valued at Rs 5.26 billion as of April-end, down from Rs 7.18 billion worth of rights shares of 22 companies previously.
Stock analysts have attributed the drop in the issue of rights shares to fulfilment of the central bank’s requirement to raise the paid-up capital by most listed banks and financial institutions (BFIs).
“As most BFIs have already fulfilled the central bank’s requirement to increase their paid-up capital, this fiscal year saw less issuance of rights shares,” said stock analyst Rabindra Bhattarai.
Analysts said that suspension of licenses for new BFIs, a bearish market and extended liquidity crunch were the reasons behind the decrease in share issuance. “As our capital market is dominated by BFIs, Nepal Rastra Bank’s policy to tighten the entrance of new BFIs has hit the volume of share issuance,” said Acharya.
Among the 28 companies approved by SEBON to offer rights shares in 2010-11, Sanima Bikas Bank’s planned issue is the largest at Rs 1.209 billion. Sanima plans to upgrade to an A class commercial bank.
Meanwhile, market experts have expressed surprise that rights share issues were undersubscribed this year. A number of BFIs who had issued rights shares to increase their paid-up capital had a hard time finding takers.
According to Bhattarai, recent cases of bad corporate governance also discouraged investors from subscribing to rights shares. “A hike in bank interest rates has turned off potential investors,” said Bhattarai.
Source: Kantipur
