Independent power producers express dissatisfaction over CDSC’s proposed dual ISIN policy for new IPOs.
CDSC has proposed a significant change in its securities identification policy, drawing sharp criticism from the Independent Power Producers’ Association Nepal (IPPAN). The core of the issue lies in the proposed mandatory issuance of separate ISIN codes for promoter and public shares during IPOs, as per the new “Dematerialization Operational Guidelines 2082” submitted to the Securities Board of Nepal (SEBON) for approval.
The International Securities Identification Number (ISIN) functions much like a citizenship number for shares. It is a globally recognized 12-digit code that helps identify and trade securities. In Nepal, ISINs are certified by the Association of National Numbering Agencies (ANNA) and are registered with CDS and Clearing Limited (CDSC). Without an ISIN, shares cannot be listed or traded on NEPSE.
Under the current rules, shares from the promoter group of hydropower, hotel and tourism, production, trading, and investment companies are subject to a three-year lock-in period after the IPO. Promoters argue that issuing separate ISINs, despite this existing lock-in rule, is unnecessary and may negatively impact the energy sector’s sentiment and investor trust.
IPPAN formally expressed its opposition to this move via a press statement released on Tuesday. The organization stated that such a policy may introduce complications for listed hydropower firms and discourage further investments.
According to the new guideline, companies will be required to state clearly in their corporate documents whether shares belong to promoters or the public during the IPO phase. CDSC will then issue distinct ISINs and stock codes for each category. However, after the lock-in period ends, companies may merge these ISINs by amending their Memorandum and Articles of Association through an AGM and submitting a formal request to CDSC.
CDSC has clarified that even under a unified ISIN, shares sold in the secondary market will still retain their legal identity as promoter shares, which has caused confusion and dissatisfaction among stakeholders. According to CDSC, this guideline aims to close regulatory loopholes that allowed some promoter shares to be traded prematurely in the secondary market despite the lock-in restrictions.
Past inconsistencies in implementation have added to the controversy. For example, Kalingchok Darshan Limited was issued separate ISINs for promoter and public shares, whereas City Hotel, backed by the Golyan Group, received only a single ISIN. This has raised questions about uniformity and regulatory clarity.
CDSC officials argue that the guideline seeks to ensure consistency and prevent future misuse. In fact, CDSC has already submitted a report to SEBON regarding some hydropower companies that were found to have traded promoter shares before the end of the lock-in period.
The origin of the ISIN debate traces back to Emerging Nepal Limited, which had initially received two ISINs (ENL for promoter shares and ENLP for public shares). After its lock-in period ended, the company applied for a merger of the two codes. CDSC refused the request, leading to a halt in the trading of promoter shares. Emerging Nepal approached CDSC, NEPSE, and SEBON for a resolution. In response, SEBON clarified that this issue falls under CDSC’s jurisdiction and does not require SEBON’s approval. This prompted CDSC to initiate a legal review under Rule 30 of the Central Depository Services Regulations, 2067, leading to the formulation of the 2082 guideline.
If implemented, the new guideline would make dual ISIN issuance mandatory at the time of IPO and allow unification of ISINs only after legal amendments and official requests post-lock-in. While CDSC believes this will improve governance and transparency, stakeholders like IPPAN argue it may introduce unnecessary complications and deter investor confidence.
This article was originally published on https://bajarkochirfar.com. Translated with the help of AI and reviewed by our editorial team.
