Implementation of the guideline has paved the way for SMEs to issue shares to the general public. However, execution of the guideline may take time as the Nepal Stock Exchange (NEPSE) and CDS and Clearing (CDSC) will have to make necessary adjustments before its full execution.
As per the guideline, any SME eyeing for public issue is required to have at least Rs 10 million and a maximum of Rs 250 million in paid-up capital. Companies can issue a minimum of 30 percent and maximum of 49 percent shares to the general public. Companies after issuing 5 percent of total offered units to merchant bankers and 15 percent to institutional investors will be provided approval for public issue. If any company fails to sell the shares to merchant bankers and institutional investors, SEBON will not grant approval for public issue. The lock-in period for shares issued to merchant bankers and institutional investors will be three years, however, such lock-in period for private equity and ventures will last only one year.
Applicants can apply for a minimum of 500 units of shares. The companies can also issue right shares if necessary.
The companies can also issue shares at premium rate, however, they are required to record net profit for three years. Companies with higher net worth per share compared to paid-up capital per share and at least average or more credit rating can fix issue price two times its net worth. Nevertheless, companies willing to issue share at base price are not bound to carry out credit rating as per the guidelines.
In order to trade the issued shares, securities market operator shall build automatic electronic trading system. The operator will fix the first trading price and change limit thereafter. Currently, there is two percent limit which can be revised by NEPSE. Similarly, the difference between last trading price and opening price of next day will be fixed by the operator itself. The number of share limit for a trading and circuit management will also be fixed by the operator.
Meanwhile, the settlement will be done by CDSC.
