NEPSE shows green light to the appointment of a new Finance Minister 

Bishnu Prasad Poudel after being appointed as finance minister for the 3rd time, in his first statement to the press outlined that he has come to shoulder up the responsibility to identify challenges of the economy and resolve the current crisis. 

Nepal’s stock market has responded positively to the appointment of Mr. Bishnu Prasad Poudel as the new Finance Minister following the formation of a new communist lead coalition government. 

The formation of the new government itself came as a surprise for many after Pushpa Kamal Dahal (Prachanda) ditched the pre-poll alliance with Nepali Congress and joined hands with K.P. Oli led CPN-UML. The Nepali Congress Party that became the largest party in the general elections 2079, and then Prime Minister Sher Bahadur Deuba, who was looking to become the prime minister for the record sixth time, were both left high and dry by the last minute development.  

The NEPSE Index went up by 161.82 points, closing at 2029.03 points on Thursday with weekly turnover of Rs. 10.99 Billion in the first week of the new FM’s appointment. The index has finally crossed the 2000 points benchmark for the first time in 4 months.  

Merger announced between Nerude & Mirmire Laghubitta Bittiya Sanstha Limited

The Chairpersons of two microfinance companies signed the Memorandum of Understanding on 11 Poush 2079. With the agreement, the substantial shareholders (i.e. shareholders owning 1% or more shares) will be prohibited from trading the stocks of the companies.  

As of now, there are 64 microfinance companies in Nepal and with the central bank providing a number of incentives to the microfinance companies that go for merger or acquisition, 16 companies are in the process of merging. 

Ghalemdi Hydro Limited to issue 200% right shares

The meeting of Board of Directors of Ghalemdi Hydro Limited (GHL) has decided to issue 200% right shares for raising the funds to invest in the 63MW Chhujung Khola Hydropower Project in Sankhuwasabha district. GHL will have at least 51% shareholding in the project that is promoted by Shangrila Urja Pvt. Ltd.  

The procedures for the right issue will begin after the approval from the Electricity Regulatory Commission & approval by the general meeting of the shareholders of the company. 

New IPO proposals approved

Securities Board of Nepal (SEBON) approves the Initial Public Offerings (IPO) proposals of Makar Jitumaya Suri Hydropower Ltd (MAKAR) & Sanima Middle Tamor Hydropower Ltd (SMTHL).

MAKAR will now issue 22,80,000 units of shares at par value of Rs.100 each.  

SMTHL will issue 83,31,250 units of shares at par value of Rs.100 each. SMTHL is one of the sister concerns of Sanima Hydro Group.

FYI, sister concerns mean two or more separate companies are owned by the same owners. The activities of sister concerns may not have any connection with the operations of each other's business. Thus, except for their common shareholding, the companies are not related legally, financially or otherwise. 

New application for IPO issue

Accord Pharmaceuticals Ltd. & Mandu Hydropower Limited have applied to SEBON for IPO and thus have been added by SEBON to its pipeline.

Accord Pharmaceuticals has applied for permission to float 7,06,909 shares to the general public at face value of Rs.100 each. 

Similarly, Mandu Hydropower Limited has also sought SEBON’s approval to issue 16,36,370 shares at Rs.248 (including Rs.148 premium). 

Companies can either issue shares at face value or at a premium under the fixed price method of IPO issue. Share premium is the additional price on top of the face value/par value of the shares. Under the Company Act, 2063 of Nepal, the companies need to meet the following conditions to issue shares at a premium: 

1. The company should be making profits and distributing dividends for at least three consecutive years; and
2. The company’s net worth should be positive (i.e. the value of total assets  exceeds the value of its total liabilities) 

Dividend (Bonus Shares) announcements made this week.

A company may decide to distribute its profits to the shareholders in the form of cash or by issuing new shares for free i.e. bonus shares. When companies announce cash dividends, they actually pay out cash to the shareholders. However, the company may issue bonus shares when it is not able to pay cash dividend to its shareholders due to shortage of funds in spite of earning good profits. It is like requiring or even forcing the shareholders to re-invest in the company. 

All the companies announcing distributions of their profits this week have decided against issuing any cash dividends meaning the shareholders will not get any immediate cash return. Why do the majority of companies in Nepal choose to distribute bonus shares instead of cash dividend? Comment your opinion below .  

Supreme Court clears way for licensing of new stock exchange & securities brokers.

On Poush 13, the Supreme Court of Nepal ruled to dismiss a writ petition filed to stop the licensing process of a new stock exchange & securities brokers in the country. Following the decision, the way to initiate the process for opening new stock exchanges & securities brokers has been cleared.

And that's all for this week. We have started this weekly news picks of the stock market to help you stay updated and informed. Let us know if this is helpful or if you have any suggestion or feedback.