The Independent Power Producers’ Association Nepal (IPPAN) has requested the Finance Committee to review the Public Accounts Committee (PAC)’s decision to bar companies with a net worth of less than 90 from issuing IPOs.
IPPAN President Ganesh Karki, in a letter to Finance Committee Chairman Santosh Chalise on Friday, urged him to take the initiative to reassess the PAC’s directive. Karki explained that the restriction has halted IPO issuance and capital raising.
On December 28, 2023, the PAC instructed relevant government bodies to prohibit companies with a net worth below 90 from issuing IPOs. Additionally, it directed that companies cannot sell one-third of their shares until they fully repay their debt.
According to IPPAN, the PAC’s decision has stalled IPOs for 43 companies.
In his letter, Karki noted that the Securities Board of Nepal (SEBON) has no regulation mandating a minimum net worth for IPO issuance. However, the PAC’s directive has created significant obstacles. He also pointed out that restricting the sale of one-third of shares contradicts existing laws.
Furthermore, Karki highlighted that project promoters and company directors are bound to their projects until their debts are repaid due to personal guarantees. If enforced, this rule would force hydroelectric project promoters to remain tied to a single project indefinitely, discouraging investment in the sector.
The restriction is also expected to create a shortage of investment funds, as capital cannot be raised. Banks are struggling to issue further loans due to IPO limitations, which is hindering overall project development.
IPPAN accused the PAC of overstepping its jurisdiction, arguing that its directive has caused confusion in the project construction process. The organization has previously sent multiple letters to the PAC, urging a reconsideration of the decision.
