More firms expected to go public with new listing rules

Amendments to public listing rules have allowed for more companies to seek public funding.

Migrating from the earlier rigid framework, the Colombo Stock Exchange (CSE) will publish the new listing rules soon, an official said.

The new rules have enabled firms that didn't comply with the earlier threshold criteria of the CSE to reapply for public listing and were introduced in a bid to attract new firms such as startups, IT companies and any company with their forward-looking business model, Viraj Dayaratne, Chairman Securities and Exchange Commission (SEC) told the Business Times. He said the rules were approved by the capital market regulator about two weeks ago. Earlier companies that wanted to list on the Main Board of the CSE had to show profit for the last three consecutive years and positive assets for the last two years while complying with the minimum public float requirement. Now the CSE has allowed firms to show (together) an 'aggregate' profit and net positive assets for the last two years. In this profit and net asset test companies would not be required to be profitable in each financial year in the three-year period as in the past. It has allowed two more options if a firm can't satisfy the profit and net asset test. In this case, either a firm can show a revenue of Rs.3 billion for the last three financial years and a market capitalisation of Rs.5 billion or a positive operating cash flow and Rs.5 billion market capitalisation.

For the Diri Savi Board (designed for much smaller companies) the CSE has allowed the positive net asset test similar to the criteria on the above explained Main Board. It has also given an option of showing Rs.350 million revenue for one year and a market capitalisation of Rs.2 billion.

Apart from this, there is a new rule for both boards which says that a company's auditor's report cannot have an emphasis of a matter of ongoing concern. (DEC)