More than 50 companies in IPO pipeline: SEC Chief

14 October 2014 06:08 am

As a result of the continuous awareness campaigns conducted on the benefits of listing on the Colombo Stock Exchange (CSE), there are now more than 50 companies in the pipeline seeking listings on the bourse, according to the capital market regulator.

Since end-2012, the Securities and Exchange Commission (SEC) in collaboration with the CSE has been conducting listing forums for the prospective companies in various parts of the country to create awareness on the benefits of listing.

“Today, my team tells me that there are more than 50 companies in the pipeline. Some may even take two to three years but some may come quite fast. We expect in 2015 a substantial number of companies to come into the market,” SEC Chairman Dr. Nalaka Godahewa said.

However, Dr. Godahewa told the capital market conference a lot of people had never thought about floating their firms due to the long stagnation of the stock exchange till the end of the conflict.

Since 2009 to date, there have been 73 new companies listed on the CSE taking the total listed entities on the bourse to 293.
The SEC likes to see 400 listed entities by end-2016.

However, during this year, a few companies sought delistings from the CSE and a few others are currently in the process of doing so, as they do not like to comply with the minimum free floating rules brought in by the SEC in a bid to improve the liquidity.

In Sri Lanka, the listed companies consist of only less than 5 percent of the total operationally active companies.
According to the capital market road map unveiled in November 2012, with a three-year time frame, increasing the number of listings was identified as the top most priority, as the lack of liquidity is remaining the biggest weakness in the country’s equity market.

In a bid to further encourage firms to list on the CSE, the budget 2013 proposed to offer a three-year half tax holiday for new companies that would be listed on the CSE before December 2013, and maintain a minimum of 20 percent of its shares with the public.

Despite these incentives, there was only one equity listing in 2013 raising Rs.494 million and five companies have been listed so far during this year, raising Rs.2.69 billion.

According to Dr. Godahewa, the immediate priorities for the development of Sri Lanka’s capital market are the infrastructure development, broad basing the investor base and the introduction of new products such as dollar bonds and derivative products.

“After two years, since the start of these projects, we are very much on time. I am very certain that by the end of next year, we will have completed 90 to 95 percent of the work in all these areas,” he confided.