Hydropower companies must float shares for locals

Hydropower companies have to float shares for the locals also, according to the amended the Securities Registration and Issuance Regulation – 2065.
According to the amendment, a company has to float a minimum of 30 per cent shares of its issued capital, unless otherwise directed by the company’s regulatory body.
Of the 30 per cent, five per cent has to be separated to the company’s staff; 10 per cent to the locals and remaining 15 per cent to the general public.
However, the locals cannot sell their share till three years. The new amendment has directed that an individual can not apply for the share as both the local inhabitant and public. "If a person applies for the share that is separated to the locals, he/she cannot apply for the shares separated to the general public."
"To encourage the real sector in the secondary market, Securities Board of Nepal (Sebon) has amended the regulation," said Shurbir Paudel, chairman of the Sebon. "If we can attract real sector in the secondary market, it can reflect the real economy," he said adding that the present market is dominated by the BFIs.
The companies like hydropower that requires a longer construction periods, can offer the shares to the public even in its construction phase provided it has obtained licence for operation. But it has to complete its one year’s audit and hold annual general meeting to float the shares. However, the company must have started its construction and attained basic infrastructures like land, buildings, warehouses etc already bought or in the process of buying capital equipments.
"It also needs to have already received loans from banks and financial institutions," according to the amendment. The debt of the company has to be limited as per the regulations and the shares have to be underwritten according to the directive.
The amendment has made it more stricter for the public. "If an applicant is found to be fake or have provided wrong information, the issue manager can confiscate the deposit amount and deposit it in the Sebon’s account," it said.
Likewise, to make the trading more transparent, Sebon will allow the right share transfer through stock exchange with the help of brokers. The regulatory authority has segregated the banks and financial institutions (BFIs) and insurance companies in one basket and the companies belonging to real sectors in the other. "These regulations are targeted to facilitate the participation of real sector in the secondary market,” said Niraj Giri, director at the Sebon.