SEBON Turns Away Real Sector Companies From Entering Capital Market

Sep 23, 2020 01:29 PM Merolagani

Companies have alleged Securities Board of Nepal (SEBON) of acting indifferent to real sector companies while giving approval of issuing primary shares.

They alleged that SEBON intentionally has not given an opportunity to many manufacturing and real estate companies to issue primary shares and have turned them away.

Stakeholders also blame SEBON of turning its back to real sector companies which have hampered the development of the capital market. They argued that it is board policy that has halted the entrance of companies functioning in various sectors into the domestic capital market. They alleged that SEBON is violating investors’ right of choosing diversified companies for investment.

History shows that the board only allows issuance of shares to those companies which have a regulatory body, are in mandatory obligation to issue shares by law, and are regulated by others. SEBON allows IPO approval to banks and financial institutions that are regulated by Nepal Rastra Bank, insurance companies that are regulated by Insurance Committee and hydropower companies which are regulated by Electricity Regulatory Commission.  They are binding through law to issue ordinary shares. These are the reason why the domestic secondary market is dominated by BFIs, insurance companies and hydropower companies. Other than that, companies from other sectors have a negligible presence in the secondary market.

It is said that the capital market is the mirror of the economy; however, the Nepalese Stock Market cannot be termed as ‘Mirror of the Economy’ for the lack of diversified and the real sector.

In a bid to encourage the entrance of the real sector in the secondary market, SEBON has done nothing particular. Moreover, it has been discouraging those companies which seek approval for the primary issue. It has been bypassing the responsibility of such companies that do not have a regulatory body by not giving the approval to issue primary shares.

With such an attitude, the domestic secondary market will take many more years to mirror the real picture of the economy.

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