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New floatations on KSE.

New Floatations on KSE

During the year 1990 as many as 50 companies were floated on the Karachi Stock Exchange. The number of companies on the list of KSE increased from 437 in 1989 to 487 in 1990. Public sector floatations were two: 19th ICP Mutual Fund and PIA disinvestment shares worth Rs. 274.352 million. Out of 50 companies newly listed 25 belong to textile and synthetic fibre, six belong to Modaraba, 3 investment bank, 3 sugar mills, 4 synthetic fibre and remaining miscellaneous industries.

Sectorwise Floatations of

New Companies on KSE

During 1990

Textile 22 Synthetic Fibre 4 Sugar 3 Modaraba 6 Investment Bank & Leasing 4 Miscellaneous 11 TOTAL: 50

Public response to the new issues was overwhelming. About nine issues were undersubscribed. The new subscriptions were dominated by textile mills. As many as 22 textile companies were placed on the stock market for public subscription. Some textile mills like Fawad, Elcot, Hala, Apex Fabrics, Mohib, Azam Saintex and Kaytex remained under- subscribed. Hala Spinning Mills was refused listing. The break-up of companies and their paid-up capital are given in the next column.

Plans are underway to set up a new stock exchange at Islamabad. This will be the third stock exchange in the country. The other two are located at Karachi and Lahore. There are 487 companies listed on KSE and 396 on Lahore Stock Exchange. Although all the companies listed on KSE are also simultaneously required to be registered at LSE many have not done so. The official decision on this effect was taken a few years ago to increase volume of business at Lahore.

Many companies specially the old companies defied recent official pressure to do so. LSE offers very little business and the companies do not want to burden themselves with payment of listing fees and quote charges at two exchanges.

The Federal Government wants the public limited companies to reduce their dependence on the banking sector and instead, generate their own funds to meet their financial requirements. For this purpose, the companies have to issue negotiable instruments for public subscription under Companies Ordinance, 1984. But so far this has been done.

The Government appointed a six-member committee headed by the Chairman of the Corporate Law Authority to see as to why the companies were not issuing negotiable instruments and report the mode of the policy that could be adopted to achieve the purpose. These instruments are to be quoted on the stock exchange. The report of this committee has not yet been issued.

Section 120 of the Companies Ordinance, 1984 permits listed companies to issue instruments in the nature of redeemable capital namely, Participation Term Certificates, Musharika Certificates. Term Finance Certificates and other securities not based on interest to scheduled banks and financial institutions. These instruments which replaced "debenture" have since been used by companies as modes of long and medium term financing.

Two changes have become apparent in the corporate development. Private Sector has been allowed to enter into life insurance business and banks to be nationalised. These two factors are likely to enlarge the capital market. Enlargement of limit from Rs. 50 million to Rs. 150 million of capital for a company to go public will hinder the process of inducing the companies to go public and get listed.
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Title Annotation:Karachi Stock Exchange
Publication:Economic Review
Date:Dec 1, 1990
Words:548
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