Chief Regulatory Officer Colombo Stock Exchange (CSE) Renuka Wijayawardhane said that the market would become more flexible allowing more types of companies to raise capital. Wijayawardhane was speaking as part of a PWC webinar series on May 18.
The CSE raised less capital for businesses than the private equity market in the recent past. Wijayawardhane said, “it was a bit challenging to beat the valuations of the private market.”
Over the last 5 years, the CSE has had 10 Initial Public Offerings (IPOs) and raised capital of Rs 5.1 billion. Peer nation Vietnam raised US$ 2.4 billion with 138 IPOs over the same period. Regional exchange Dhaka raised US$ 170 million with 48 IPOs.
Under new proposed rules the stock exchange will no longer require companies to disclose pricing of their offerings at the initial stages. Companies will be given a large window within which they can decide to go to the market to raise capital and will only have to notify the public of a price 7 days before the offering.
In terms of allotment, the stock exchange will be very flexible. For issuances above Rs 3 billion, the issuer will have full discretion on how the allocation is issued. The issuer is further empowered to dictate terms and modality of payment. This flexibility will be granted so long as the actions of the issuer are fair and reasonable. Under the current legal framework unit trusts are not allowed to invest in real estate. Stamp Duty which comes through the Provincial Council Act makes it unattractive to trade in units of a building through a unit trust. Inquiries have been made by the exchange for flexibility on the rate of the stamp duty in the Western Province. Wijayawardhane said, “We are quite keen on listing Real Estate Investment Trusts in the near future.”
The listing of infrastructure projects is currently not possible through the legislation. There is potential to facilitate this through the listing of special purpose vehicles that issue debt or other instruments on the exchange. The exchange is looking for market makers to create Exchange Traded Funds (ETFs).
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