May 29: Nepal Stock Exchange (NEPSE) is preparing to increase its paid-up capital by Rs 2 billion. NEPSE currently has a paid-up capital of Rs 1 billion and plans to increase it to Rs 3 billion to meet the new criteria set by the Securities Board of Nepal (SEBON).

The Securities Board of Nepal (SEBON) amended the Securities Market Operation Regulations, 2064 for the second time to introduce a new stock exchange. As per the new provision, the paid-up capital of the stock exchange company should be Rs 3 billion.

In the regulation, a shareholder of the stock exchange can only hold a maximum of 15 percent of the total capital, at least 30 percent of the shares must be issued to the general public within 2 years of operation, and the trading system used by the stock exchange must be used in at least three foreign stock exchanges. The Board implemented the second amendment to the Securities Market Operation Regulations, 2064 from September 11.

According to NEPSE’s information officer Murahari Parajuli, although the provision is not mandatory for NEPSE, which has been in operation before the implementation of the revised regulations, it is necessary to increase the capital to become competitive.

NEPSE believes that by maintaining the financial and technical success achieved so far, it can become a competitive market operator moving forward with new equipment and technology. According to Parajuli, NEPSE has sent suggestions to the Ministry of Finance for structural changes in NEPSE, including changes in capital structure, modern multi-asset trading technology and arrangement of trading tools according to market demand.

According to Parajuli, the Government of Nepal owns 58.66% shares of Nepse, Nepal Rastra Bank 14.60%, Employees Provident Fund 10%, Rastriya Banijya Bank 6.12%, Laxmi Bank 5%, Prabhu Bank 5% and others 0.62%. In the current situation, when the actual valuation of the company's shares is done, NEPSE claims that its value will be worth Rs 50 billion. If the government offloads some shares, it is estimated that the government will receive a large sum of money including foreign currency.

In recent years, stock exchanges around the world have been integrated with strategic partners and companies with good corporate governance and the trend of selling shares to the general public has started, so NEPSE also wants to follow the same process.

NEPSE has planned to sell the IPO to the general public at the premium rate. In order to increasse the paid-up capital to Rs 3 billion, NEPSE will issue 90 million shares to the general public including employees. Likewise, NEPSE plans to sell 21.77 percent shares to domestic organizations with good corporate governance and 15 percent to foreign strategic partners.

As NEPSE prepares to become a competitor with the new stock exchange, the license distribution process of the new stock exchange is in confusion. A meeting of the Council of Ministers on May 19 decided to hold the process for the time being saying that it is necessary to distribute the license of the new stock exchange only after further study.