• Catalyst Board an alternative if required
• Listing decision rests with Govt. 

The Colombo Stock Exchange (CSE) has said that an Initial Public Offering (IPO) on a board suited to each institution would be the optimal route for bringing State-Owned Enterprises (SOEs) onto the bourse, with its Catalyst Board available as an alternative.

A CSE spokesperson told The Sunday Morning that the decision on whether and how to list SOEs rested with the Government. 

“From a market perspective, however, an IPO through listing on a board that is appropriate for the specific institution is optimal,” the spokesperson said, adding that the Catalyst Board could also be used as an alternative if required.

Listing requirements varied from board to board, the spokesperson said, so the appropriate board would be determined by the specific SOE.

The Catalyst Board was set up specifically with SOEs in mind, but no SOE has yet used it. 

The Securities and Exchange Commission (SEC) approved the creation of a separate listing board and listing rules for SOEs in September 2023. The rules were developed in consultation with the Government’s SOE Restructuring Unit and the Auditor General. 

The regulator said at the time that the framework had taken into account the governance, organisational, and operational challenges in the SOE sector, and was meant to allow such entities to progressively transition to the standards expected of listed companies.

On whether the market could absorb sizeable SOE share offerings without hurting valuations or liquidity, the spokesperson pointed to investor demand. 

“Foreign and local institutional and retail investors would play the decisive role in determining the market’s capacity to absorb SOE share offerings,” the spokesperson said. 

They noted that Sri Lanka was already moving in the right direction, with average daily turnover more than tripling and active investor participation nearly tripling between 2020 and 2025. The quality, governance, and transparency of the SOEs coming to market would also help attract long-term capital.

The CSE later highlighted the board as the vehicle for SOE listings proposed in the 2025 Budget. In March last year, then Chairman of the CSE Dilshan Wirasekara said that the framework allowed any SOE to list, including banks, the Ceylon Petroleum Corporation (CPC), and the Ceylon Electricity Board (CEB). 

He noted, however, that the Government’s plans for SOE listings remained unclear.

Momentum has since picked up on the regulators’ side. In March this year, the SEC and the CSE convened a forum in Colombo bringing together more than 45 SOEs with Government officials, investment bankers, and market participants. 

The forum examined how public enterprises could raise capital through listed debt and equity, as policymakers look to reduce reliance on Treasury funding.

The SEC has argued that listing would discipline the sector. It has described the poor performance of many SOEs as a heavy fiscal burden with significant macroeconomic implications. 

It noted that most SOEs had relied on Government funding and borrowings for expansion, and said that listing would improve governance and efficiency while attracting local and foreign investor capital.