Recently, Securities Board of Nepal (SEBON) has implemented the Securities Issue and Allotment Guidelines, 2074 including several guidelines for IPO/FPO allotment, IPO listing, bonus share registration, right share issuance and commencement of trading after merger/acquisition.
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Under the new regulation, IPO/FPO should be allotted within minimum 30 days and listed within 2 months of the IPO closing date. Likewise, the Board has also made it mandatory for all applicants to be allotted a minimum of 10 units of shares—now replacing the existing provision to set aside 40% shares for retail investors and 60% shares for other investors under the securities allotment guidelines, 2068.
General Investors are confused regarding whether to apply huge amount like before or apply shares on low quantities for upcoming IPO and FPO of Nepal Hydro and Pokhara Finance respectively. Sharesansar tries to identify the answer for the investors based on new provisions and past IPO trend.
Let’s see, what are the provisions related to IPO allotment in newly implemented Securities Issue and Allotment Guidelines, 2074:
The guidelines clearly stated that all the IPO/FPO investors will be first allotted 10 units and then remaining units will be allotted to the investors demanding 20 units and more. Here, again 10 units will be allotted to such investors and if all the investors are unable to get minimum 10 units each then allotment will be based on lottery basis.
So based on above new guidelines from SEBON, now it will be useless to apply huge amount on upcoming IPO and FPO of Nepal Hydro and Pokhara Finance respectively like before.
Let's analyze past IPO/FPO number of applicants trend,
Based on the past IPO/FPO number of applicants’ trend, we can expect minimum 1 lakh applicants on any IPO/FPO.
Then what will be the strategy on the upcoming IPO of Nepal Hydro and FPO of Pokhara Finance.
Nepal Hydro Developers Limited (NHDL) – Initial Public Offerings (IPO):
Nepal Hydro Developers Limited is issuing 3,90,000 units to general public from 27th Shrawan, 2074. Out of 3,90,000 units, 27,300 units is set aside for mutual fund and staff which means just 3,62,700 units will be left for general public. As per the company announcement, investors can apply minimum 50 units and maximum upto 1000 units.
Here, 3,62,700 units are set aside for general public which means only 36,270 investors are eligible to get 10 units shares.
The minimum expected applicants will be 1 lakhs which means all investors won’t be able to get 10 units. In this case there will be lottery as per new guidelines.
Recommendation: Applying 10 units will be good enough but since the company has made mandatory to apply minimum 50 units. Investors are advised to apply just 50 units.
Pokhara Finance Limited (PFL) – Further Public Offering (FPO):
Pokhara Finance Limited is issuing 9,83,682 units to general public from 29th Shrawan, 2074 at Rs 220. As per the company announcement, investors can apply minimum 10 units and maximum upto 4900 units.
Here, 9,83,682 units are set aside for general public which means only 98,368 investors are eligible to get 10 units shares.
The minimum expected applicants will be 1 lakhs which means all investors will get 10 units or there can be meager chances of lottery. If number of applicants exceeds 1 lakh then there will be confirm lottery.
Recommendation: Investors are recommended to apply 10 or 20 units maximum.
Pros of New Guidelines:
- Small investors are benefited since there is high chance to get minimum 10 units.
- No need to apply huge amount on IPO/FPO like before. This means investors interest cost will be saved.
- Before there was a trend of selling shares on NEPSE and applying for IPO/FPO. Now people will apply less means there won’t be selling pressure on NEPSE due to IPO/FPO. NEPSE is positively affected.
Cons of New Guidelines:
- High chance of increase in fake applicants.
- Share will be scattered means manipulators can easily manipulate price of the share by holding just few thousand shares. (Cornering is possible)
Source: ShareSansar, August 6, 2017
