Share market to see rain of primary issues
KATHMANDU,JAN 06:
The primary market is gearing up to handle large public issues after staying idle for a period following the dismal market situation.
Janata Bank is floating the largest public issue worth Rs 600 million soon. There will be four more commercial banks that will float their primary shares in next six months.
Janata Bank appointed Citizen Investment Trust (CIT), NMB Capital and Civil Capital as the underwriter and issue manager of its primary issue.
“We are hopeful that the primary issue will be well-received despite the market situation since this is the only big initial offering in the recent times from commercial bank,” said chief executive of Civil Capital Bhishma Raj Chalise.
The bad state of capital market in the recent times had deterred a number of financial institutions to offer shares to the public with the fear of getting undersubscribed. Only five financial institutions have applied for the approval from the capital market regulator since the beginning of the fiscal year. The initial public offering of recent times had difficult time getting subscribed. Moreover, over-supply of the shares has pulled the price of the shares down in the absence of sufficient demand.
Janata Bank will be applying to Sebon for issue approval within next few days. “The issue managers have done research before announcing the issue and found that the investors will not reject the shares of large commercial banks as if the market reverts back the share prices of commercial banks will be riding high,” informed Chalise, who is also president of Merchant Bankers Association of Nepal (MBAN).
According to Nepal Rastra Bank (NRB) regulation, the licensed banks and financial institution need to issue the ordinary shares allotted for general public within two years of coming into operation at maximum. Moreover, according to Securities Board of Nepal (Sebon)’s regulations regarding public issue, companies can offer shares to public only after completion of one whole fiscal year. Thus the remaining four commercial banks can only conduct their initial offering after the completion of this fiscal year. The public offering of the remaining banks is supposed to be bigger than that of Janata Bank.
“The market has to gear up for more shares with the upcoming primary shares of commercial banks,” he pointed out, adding that the over supply could be balanced through the entry of institutional investors like Mutual Funds and central depository system.
There are more than 360 million unit shares getting ready to debut within next two years in the capital market as five commercial banks, 32 development banks and eight finance companies that need to issue 30 per cent of the paid up capital to the public as ordinary shares within two years according to the regulation.
“The additional shares will definitely put pressure on the capital market that is already being bugged with the oversupply but we can expect the operation of Mutual Funds and central depository will also propel the transactions,” said director of Securities Board of Nepal Niraj Giri.
