Kathmandu. The Independent Energy Producers’ Association of Nepal (IPPAN) has drawn serious attention to the recent decision of the Board of Directors of CDS and Clearing Limited (CDSC) regarding the listing of shares of the companies.
Cdsc has sent a proposal to the Securities Board of Nepal for issuance of separate International Securities Identification Number (ISIN) number of shares issued to the founders and general public of all the companies by extending the process of dematerialization of the founder group of companies that are in the process of being listed by publicly issuing shares in the securities market.
The proposal has not only created more confusion and ambiguity among the founding investors, the private sector, foreign investors, and the general public investing in shares, but it has also created a situation of disappointment among them. If this proposal is implemented, then this proposal, which is being implemented in Nepal’s capital market so far, contrary to the prevailing laws, international norms and established ISIN practice, will have a long-term impact on Nepal’s capital market as well as the international world’s attitude towards the country. There will also be difficulty in managing investment and foreign investment coming through Non-Resident Nepalis.
This has led to the loss of confidence in the investment made by the private sector in various industries and businesses in Nepal and has also raised serious doubts about the investment environment of Nepal among foreign investors. Cdsc’s proposal will create an environment in which foreign investors who have invested in Nepal will not be able to withdraw their investment by selling their shares.
It is clear that this will have a huge negative impact on the government’s foreign investment promotion policy, capital market consolidation and overall economic reform goals. At present, the market is moving due to the large share of the founders and the general public in the same ISIN, but if kept separately, nepal’s capital market will be in serious crisis, billions of capital gains tax will be lost by the government and the commission income of the broker company and NEPSE will also fall drastically.
The biggest impact will be on the energy sector. At a time when the number of founding stock investors has been increasing in recent times, the proposal of separate sectors will lead to a big decline in institutional investment. This will make it impossible to implement the energy development roadmap with the target of generating 285000 MW within the next 10 years. To achieve this goal, 6.1 trillion dollars will be needed and out of this amount, 10 billion dollars from internal sources (private sector, banks and financial institutions), 12 billion dollars of non-resident Nepalis and nepalis in foreign employment and 8.5 billion dollars including foreign investment.
Not only the energy sector, but the private sector will not be able to raise capital in productive industries such as tourism, health, infrastructure, and will discourage investors who are moving forward in start-ups, private equity, venture capital, etc. This arrangement will not only adversely affect the companies in the process of dematerializing the shares by issuing IPOs, companies that are about to expire the lock-in period by issuing IPOs and companies in the pipeline of IPO, which will not only negatively affect the overall capital market in the long run, but will also affect nepal’s economy.
Analyzing the data of the Securities Board, this will affect the number of 870 million shares worth 87 billion in 58 industries including energy, media and cement during the lockdown period. Similarly, 53 crore shares worth Rs 53 billion will be affected in 47 projects of energy alone. Similarly, the investment of 37 companies (except six companies removed by the Securities Board without any basis) who have applied to the Securities Board for issuance of shares worth Rs 41 billion is also likely to be affected.
At present, the public issued shares have been kept locking period for three years, so the CDSC itself cannot sell (like the land mortgaged in the land revenue) and locking (shares cannot be sold by the investors even if they want to). The existing provision of not being able to sell only after publishing three notices in the national newspapers a month before the opening of the locking period and in the case of directors who cannot sell for one year even after the locking period is over and even after resigning from the director, the new arrangement does not seem necessary.
Therefore, we believe that the implementation of the proposal of different interest numbers to shares of the same nature due to equal price, rights and equal rights in dividends of the founders and public groups is not only completely legally illegal, but it is also a big obstacle to achieving the goal of making the country prosperous by creating employment and increasing economic activity through entrepreneurship, including energy, within the country by bringing in and mobilizing more investment. ।
Therefore, IPPAN strongly urges the regulatory bodies to make arrangements to dematerialize all the shareholders by keeping the same ISIN number as per the existing arrangement as soon as possible to maintain market transparency and investor confidence. We strongly urge the Board not to proceed with the implementation process and encourage the investors to withdraw the proposal of separate ISIN numbers proposed by the CDSC.
