Sebon panel to recommend on premium FPO pricing

The Securities Board of Nepal (Sebon) has formed a five-member committee to study and recommend the standards on premium pricing while conducting Further Public Offering (FPO). Based on the recommendation of the committee, Sebon will prepare a working procedure for premium pricing. The committee is led by Sebon board member Mahesh Khanal and includes another representative from Sebon, two chartered accountants and one expert. After Nepal Life Insurance Company announced a plan to float 3.95 million shares at “unusually high” price of Rs2,951 per share, the Sebon on June 10 had temporarily banned trading of the company’s shares. Although the trading ban was lifted without approving the price quoted by the company, the board went for preparing a unified standard for premium FPO pricing. “The committee will recommend the basis for premium price fixation,” said Sebon Spokesperson Niraj Giri. As of present, clear regulations are lacking for fixation of premium prices. “New regulations regarding premium-price-fixation will be formed as per international practices and valuation techniques in foreign securities markets,” said Giri. The Securities Registration and Issue Regulations of 2008 require a company to fulfil a resolution related to the new issue (further public issue) passed by the general meeting. The laws further state if the price of the proposed issue is to be fixed higher than the face value, the methodology of fixation of price and basis and justification of the premium must be provided by the issuing company. According to Sebon officials, effective implementation of the laws is difficult amid a lack of such policies. The Sebon has initiated the process with an intent to solve the issue which invited controversy in the case of Nepal Insurance Company. The panel’s coordinator Khanal said its first meeting was held on Sunday. “After studying international practices we will forward our recommendations regarding an appropriate pricing mechanism for securities market.” Source: ekantipur