Share market sees no more IPOs
KATHMANDU, NOV 7:
The over-heated primary market seems to be cooling off as only one company has applied for Initial Public Offering (IPO) to the regulator for this year so far, let alone the rights issue.
Pascchimanchal Grameen Bikas Bank is the only company that has applied for the regulator’s approval for primary issue of 34,000 units of ordinary shares.
Securities Board of Nepal (Sebon) — the capital market regulator — has not received any application for the right issue approval as well.
By the end of first quarter of the current fiscal year, no company has got the approval for primary issue, while in earlier fiscal years, the first quarter would have witnessed numbers of financial institutions lined up for their IPOs.
Like secondary market, the primary market is also dominated by financial institutions and since some time financial institutions’ involvement in IPOs has noticeably gone down.
“The financial institutions basically issue shares in order to comply with Nepal Rastra Bank (NRB)’s mandatory provision requiring them to increase paid up capital through rights issue and lately most of the existing banks and financial institution have fulfilled the requirement the number of IPOs have reduced,” explained deputy director of Sebon Dr Nabaraj Adhikari.
Few financial institutions are waiting for the right environment for primary and rights issue,” he added.
The secondary market’s condition is dismal at present as the stock market could not shake off its bearish trend. The market is hovering over 330 points since last three months and the activity in the market has also reduced.
“The market situation can be held entirely responsible for less public issues, if the market had more real sector companies that had issued shares to public by choice not by compulsion as is in the case of financial institutions,” Adhikari pointed out.
However, merchant bankers are considering the current market scenario as the deterring factor for companies to issue shares. “There is no charm on buying shares through primary issue when the same shares can be purchased at less than the face value from secondary market,” pointed out president of the Merchant Bankers Association of Nepal Bhisma Raj Chalise.
Moreover, the risk of IPOs getting unsubscribed is also making the companies apprehensive about public issue as lately few issues of financial institutions took a lot of effort to get completely subscribed.
“Even merchant bankers are worried about the new issues due to possibility of under-subscription and has made the job of underwriting a lot more risky,” he added.
In last fiscal years, the share market witnessed rain of primary and rights issues as the market was on bullish trend but the share market has not been performing well currently diverting the investors to other possible investment opportunities like depositing in the banks and financial institutions as the interest rates are higher than the rate of return of the shares.
The low rate of return and over supplied share market also distracted the investors and made them worry about exit but Nepse could not attract new investors.
Similarly, lack of government incentives also distracted the companies to be listed in the Nepse.
Source: Kantipur
