CSE and SEC encourage equity, corporate debt listings with new guide

Monday, 26 August 2013 00:05 - - {{hitsCtrl.values.hits}}

By Kinita Shenoy The CSE has issued a publication to increase the awareness of potential issuers on listing of equity and corporate debt securities on the Stock Exchange. The compiling of this publication is an initiative of the SEC/CSE committee on new listings, both public and private, which is one of the 10 key projects of the SEC. CSE Chairman Krishan Balendra outlined the objectives of the publication, stating: “We aim to use this to encourage companies that are as yet unlisted by detailing the various advantages and incentives that being listed on the CSE offer.” He highlighted the CSE’s steady increase in listings in the period since 2008, within which over 80 companies listed themselves. Balendra also pinpointed the encouraging number of corporate debt securities listings of late, which he attributed to a cocktail of positive market sentiment and the new incentives such as potential access to a deep pool of capital and applicable tax exemptions. The Government’s 2013 Budget also featured an assortment of concessions introduced with the aim of stimulating capital market growth.

Balendra mentioned that due to the market downturn, valuations have not been particularly attractive for equity listings which have consequently diminished since the 2010/2011 boom, while the corporate debt listing inquiries have flooded in. The booklet is meant for all parties interested in capital markets, with a range of topics covered including case studies of recent successful listings, considerations whilst planning for an IPO, the process involved, along with timing the market, the parties involved, and the regulatory and legal framework governing the same. The fees involved, also mentioned in the publication, are relatively low at Rs. 150,000 and an annual fee of Rs. 50,000. SEC Chairman Dr. Nalaka Godahewa added that both the SEC and CSE recognised the need to expand the debt market and started actively canvassing using incentives over the past five years. He further mentioned: “For any market to grow, you need to have diversified products. Despite the corporate debt market growth of late, the secondary market is still inactive due to of a lack of market penetration. This is why we have made a decision to allow primary dealers to engage in the corporate debt market. They are now allowed to invest 5% of their investment portfolios in corporate debts.” CSE CEO Surekha Sellahewa said: “We are currently putting in the criteria to allow any interested parties to become trading members. As primary dealers have the capital requirements the procedure for them is fairly straightforward, although they need to have the infrastructure and the right people in place.” She also mentioned another category for non-primary dealers, with the criteria of Rs. 100 million in capital and positive net assets for three years. Balendra summed up the session, commenting that the SEC and CSE had a joint committee looking at encouraging new listings, as the market is very small even in the context of Sri Lanka’s economy. He lamented the fact that the total market caps for all the listed companies in the country comprise only about 30-35% of total GDP, whilst other regional countries’ stock exchanges have market caps that are double their GDP, indicating that there is a considerable way to go despite the encouraging listings boom in the past half-decade or so.