Nepal’s Capital Market Faces Uncertainty: IPPAN Raises Concerns Over Proposed Dual ISIN System
Hello everyone, and welcome back to the blog! Today, we’re diving into a crucial topic impacting Nepal’s capital market and the financial sector. We’ll be discussing the concerns raised by the Independent Power Producers’ Association, Nepal (IPPAN) regarding a proposed change to the share dematerialization process that could significantly affect both investors and the broader economy.
IPPAN, a leading organization representing independent energy producers in Nepal, has voiced strong reservations about a proposal from the Central Depository System and Clearing Limited (CDSC). The proposal aims to introduce a dual International Securities Identification Number (ISIN) for company shares. This means having two separate ISINs – one for the general public and another for promoters – during the process of share listing.
What’s the fuss about this dual ISIN system? According to IPPAN, this change could create significant uncertainty and discourage investment from various sources, including foreign investors, the Nepali diaspora, and even domestic investors. This isn’t just a minor tweak; IPPAN warns that it could undermine the existing legal framework, established practices, and international standards within Nepal’s capital market.
The potential consequences are far-reaching. IPPAN highlights that this change could hinder the flow of foreign direct investment (FDI), as well as funds from Non-Resident Nepalis (NRNs). It could also make it difficult to manage capital flows and investment effectively. Essentially, this could lead to the stagnation of capital markets and significantly impede the economic development of the country.
Energy Sector Concerns: A Specific Look
The impact could be particularly acute in the energy sector. IPPAN’s President, Ganesh Karki, has pointed out that the current system, where both founder and general shares share the same ISIN, facilitates a dynamic share market. Implementing separate ISINs could stifle trading and diminish government revenue. Similarly, IPPAN’s Senior Vice President, Mohan Kumar Dangi, has highlighted that the proposed system could negatively affect the investments of the companies and thus have a strong impact on the government’s plan to generate 28,500 MW of electricity.
Beyond the Energy Industry: Wider Implications
The concerns aren’t limited to the energy sector. IPPAN’s General Secretary, Balram Khatiwada, has stated that the proposed dual ISIN system could jeopardize investment in other key sectors, like tourism, healthcare, and infrastructure. This could create huge disruptions by hampering the capital collection of industries of this nature.
Moreover, the proposal could severely impact companies undergoing initial public offering (IPO), those with their lock-in periods nearing completion, and others in the IPO pipeline. This could lead to billions of rupees worth of capital being tied up, affecting the liquidity of the market and causing long-term damage to Nepal’s economy. IPPAN estimates that the proposal could lock up billions of rupees in various companies that have issued IPOs.
This situation presents a significant challenge for Nepal’s capital market. The concerns raised by IPPAN highlight the need for careful consideration and a thorough evaluation of the potential ramifications of this proposed change. We’ll continue to monitor this developing situation and keep you updated on any developments. Stay tuned!
