We support SMEs through the Empower Board, encouraging businesses to seek alternative financing options beyond traditional banking norms by listing on the CSE

Dilshan Wirasekara
Chairman

Q: What strategies does the Colombo Stock Exchange (CSE) adopt as an exchange to attract companies for listing?

A: Several initiatives are underway to enhance the listing process for companies.

The CSE has distinct boards catering to various company sizes and sectors – the Main Board for large companies, the Diri Savi Board for mid-cap companies, the Empower Board for SMEs, the Catalyst Board for state-owned enterprises (SOEs) as well as a foreign currency board. This enables any company, regardless of size or industry, to list and benefit from raising capital through the CSE.

We support companies throughout the listing process with a facilitative set of rules, speedy approvals and a streamlined process, making it easier for companies to access capital, and offer a variety of debt and equity products to investors.

Q: The CSE has provided investors with debt and equity products. What new product initiatives have been offered?

A: We recently introduced stock borrowing and lending (SBL), as well as regulated short selling (RSS), marking a significant milestone for the CSE. These innovations allow shareholders to lend shares and enable investors to profit from a declining market through short selling.

We introduced sukuks as a debt product and launched the framework for sustainable bonds such as green bonds. The CSE is also considering the introduction of equity derivatives like options and futures to further diversify our financial products.

We have also developed infrastructure bonds to inance large-scale infrastructure projects such as roads, power plants and ports, which are typically government driven

Q: SMEs play a crucial role in the economy. How do you intend to assist them in rebalancing balance sheets?

A: We support SMEs through the Empower Board, encouraging businesses to seek alternative financing options beyond traditional banking norms by listing on the CSE.

Listing on the exchange requires adherence to certain standards including maintaining audited accounts, implementing stringent governance structures and following established processes. By conforming, SMEs can elevate their operational standards and overall business practices.

The CSE, in partnership with the United States Agency for International Development (USAID), supports SMEs with workshops and hands-on assistance, providing necessary resources and guidance to help them grow and advance to the next level.

Recognising that SMEs may lack the expertise to navigate the listing process independently, we also collaborate extensively with investment banks to assist them. The listing process has been further streamlined to make it more accessible. These efforts aim to help SMEs raise capital, improve governance and grow into larger, more structured enterprises.

Q: What instruments are in place for the government to raise capital?

A: The CSE introduced the Catalyst Board for SOEs, featuring customised listing rules to accommodate their unique situations, and facilitate their listing and divestment.

We have also developed infrastructure bonds to finance large-scale infrastructure projects such as roads, power plants and ports, which are typically government driven. This initiative allows the government to share the financial burden of these projects by raising capital through bond issuances.

Furthermore, we are exploring the divestment of 20-30 percent stakes in People’s Bank and the Bank of Ceylon, as announced in the 2024 budget. Our role will include facilitating the listing of these banks and potentially incorporating an employee share ownership plan (ESOP) as part of the divestment.

This scheme may allocate shares to employees and customers for financial consideration with the remaining portion offered to strategic investors while the government retains control. Listing these state banks is crucial as it will substantially increase CSE’s market capitalisation.

Q: Can you elaborate on the CSE’s plans to introduce the central counterparty settlement (CCP) system in the near future?

A: The CCP is designed to enhance the settlement process of share transactions by acting as an intermediary between buyers and sellers. Currently, the seller parts with shares on day one while the buyer’s payment is completed on day two. Any failure in this process could lead to significant market disruptions and loss of confidence.

The CCP mitigates this risk by introducing a legal entity that acts as a custodian for both the shares and funds, ensuring that the exchange takes place simultaneously on the settlement date. This guarantees the completion of the transaction, eliminating the risk of settlement failure, thereby enhancing market stability and investor confidence.

– Compiled by Tamara Rebeira

 Telephone: 2356456 | Email: info@cse.lk | Website: www.cse.lk