Telcos with Rs50m capital must go public

  • Amended Company Act 2007
- Rajesh Khanal, Kathmandu

May 6, 2017-The telecommunications companies with a capital investment of Rs50 million are now required to go public, as per the amended Company Act 2007 that came into effect on Tuesday.

As per the rules, all telecommunications and internet service providers (ISPs) should mandatorily issue shares to the general public within the next two years.

According to the Nepal Telecommunications Authority, six telecom companies--Nepal Telecom, Ncell, United Telecom, STM Telecom, Smart Telecom and Nepal Satellite--are currently in operation in the country. Out of them, only Nepal Telecom has issued shares to the general people.

The government has introduced the provision by amending the Company Act-2007, said Purushottam Nepal, spokesperson for the Ministry of Industry. The Legislature-Parliament had endorsed the amended Act a few months earlier. The amended Act has already been endorsed by the President.

According to the ministry, the amended act also maintains that the companies with more than 49 hareholders are mandatory to go public. Previously, there was no such mandatory provision for the companies to issue public shares.

The government’s move is expected to incorporate more realty-sector based companies in the capital market. Banks and financial institutions make up for most of the 221 companies currently listed on the Nepal Stock Exchange.

Spokesperson for the Securities Board of Nepal (Sebon) Niraj Giri said the provision was expected to increase the size of stock market. “The law could encourage private companies to offer shares at the time when they are reluctant to go public,” he said. The amended Act is expected also to serve as compliance to stocks market regulator’s effort in attracting the realty sector companies to the capital market, Giri said, adding that Sebon itself had also been preparing a new directive on Securities Registration and Issue Regulation to attract such companies to the secondary market.

The regulator is expected to enforce the new directive shortly. “Through the new regulation, we have planned to allow the realty sector companies to issue their shares at premium,” he said. “The modality on which the companies should enlist the premium price for their shares is under discussion.”

Giri said the premium price could be based on the companies’ performance in the past along with their financial position. “The net worth, cash flow and market good could be the key factors to set the premium price while going public,” he added.

Meanwhile, a number of private companies from production and trading business have shown interest to go public in the recent days, according to Sebon. These include cement manufacturers and agriculture business in particular.

Published: 06-05-2017 09:27

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