Haphazard Premium imposing practice forbidden

The companies on the pipeline for issuing IPO are now prohibited to charge the premium exceeding their net worth. The subject under analysis for pretty long time in the ministry of finance has finally been decided. Securities Board of Nepal previously proposed on permitting the profitable companies to sell their initial public offerings by adding two to two and a half times more premium than their net worth. This has come to an end now. Till date the companies giving dividend for three consecutive years were regarded as having sound health and they could sell their shares in premium.

Based on the "Securities Act, 2063", the new "Securities registration and issue regulation" was made which is now approved by ministry of finance as well. The new regulation aims to make the registration and issue process more transparent. The board has already prepared regulations for SEBON, Nepal Stock Exchange, brokers, market makers and merchant bank and is on its way to bring about regulations for mutual funds.

In the scenario when the proposed regulation is amended and finalized by the ministry of finance, no company can issue their shares with premium more than their net worth. Hence, the companies such as Chilime Hydro Power Co. Ltd. and Arun Valley Hydropower Development Co. Ltd. who were thinking to issue their shares at heavy premium have to step back and address new price. CHCL was about to sell its shares at Rs. 600 each by adding Rs. 500 premium on the shares with Rs. 100 face value. Likewise Arun valley was about to issue its shares at Rs. 400 by adding Rs. 300 premium on each shares.

At the same time, the turmoil of the Nepal Telecom's remaining unsubscribed shares has risen. At what price will its remaining shares be sold is a big question still lingering around.
Source: Jamb News Service