The Finance Committee under Nepal’s House of Representatives has instructed the Securities Board of Nepal (SEBON) not to bar companies with a net worth below Rs 90 from issuing initial public offerings (IPOs). The directive came on Friday in response to SEBON’s recent decision to enforce the Rs 90 net worth threshold, which had drawn criticism from various stakeholders.
SEBON had adopted this restriction following a directive from the Public Accounts Committee (PAC) of Parliament issued on December 29, 2023. As a result, companies with a net worth below the specified amount were barred from accessing the capital market. Acting on this policy, SEBON removed 14 companies from its IPO pipeline, including Annapurna Cable Car, Kantipur Television, Sanima Hydropower, and Prabhu Helicopter.
The move triggered backlash, especially from the Independent Power Producers’ Association Nepal (IPPAN), which accused SEBON of irregularities, including allegedly demanding commissions in exchange for IPO approvals. In light of these allegations and mounting pressure, the Finance Committee intervened.
Santosh Chalise, Chairperson of the Finance Committee, clarified that while SEBON holds the authority to approve IPOs, it must adhere to the law and avoid applying arbitrary thresholds. He emphasized that the regulatory board should base its decisions on legal and financial due diligence rather than blanket restrictions.
A SEBON official defended the net worth requirement, citing concerns about hydropower developers allegedly producing misleading financial statements to secure IPO approvals. These companies were reportedly offloading promoter shares before the mandatory lock-in period ended, thereby raising risks for retail investors.
The PAC’s original intent behind the threshold was to safeguard investors and prevent premature share dilution, especially during the construction phase of projects. This position was also echoed by the High-Level Economic Reforms Advisory Commission, which recommended that IPOs be allowed only after projects become operational to minimize financial manipulation and protect public funds.
As the debate continues, the Finance Committee’s directive signals a push toward more flexible but law-abiding IPO regulations, balancing investor protection with access to capital for emerging companies.
