Kathmandu. Independent Power 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.

The CDSC has sent a proposal to the Securities Board of Nepal (SEBON) to issue separate (ISIN) numbers of shares issued to the founders and the general public of all the companies, extending the process of dematerializing the shares of the founding group of the 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, private sector, foreign investors and the general public investing in shares, but it has also created a situation of frustration among them.

If implemented, this proposal, which is still being implemented in Nepal’s capital market, contrary to the prevailing laws, international norms and established 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 be difficulty.

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 cannot sell their shares and withdraw their investment.

It is clear that this will have a huge negative impact on the government’s foreign investment promotion policy, strengthening the capital market and overall economic reform goals. Now that the shares of the founders and the general public are in the same ISIN, its share is large, the market is moving, but if kept separately, nepal’s capital market will be in serious crisis, the government will lose billions of capital gains tax and the commission income of broker companies 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, separate proposals will lead to a huge decline in institutional investment. This will make it impossible to implement the energy development roadmap with the target of generating 28,500 MW within the next 10 years.

To achieve this goal, a total of $30 billion ($4 trillion) will be raised, including $10 billion from internal sources (private sector, banks and financial institutions), $12 billion from non-resident Nepalis and Nepalis in foreign employment, and $8.5 billion in 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 affect the companies in the process of dematerializing the shares by issuing THE IPO, the companies that are about to expire the lock-in period by issuing the IPO and the companies in the pipeline of the IPO, and it will not only have a negative impact on the overall capital market in the long run, but will also affect the economy of Nepal.

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). A month before the opening of the locking period, the national newspaper can be sold only after publishing three notices and in the case of the directors, the existing arrangement is not enough to sell even after the locking period is over and not to sell for one year even after resigning from the director.

Therefore, we believe that the implementation of the proposal of different (ISIN) numbers to shares of the same nature due to equal price, rights and equal rights to 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 and more investment. ।

Therefore, IPPAN strongly urges the regulatory bodies to make arrangements for the dematerialization of 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.

At the same time, we strongly urge the Securities Board not to proceed with its implementation process by urging the CDSC to withdraw the proposal of separate (ISIN) number proposed by the CDSC and to encourage the investors by withdrawing it.