In a move drawing intense scrutiny and public backlash, Santosh Narayan Shrestha, Chairman of the Securities Board of Nepal (SEBON), has approved the Initial Public Offering (IPO) of Bungad Hydropower, a company in which he and his family reportedly hold a financial stake.
Key Facts:
- Shrestha owns 33,000 shares in Bungad Hydropower.
- On June 29, SEBON approved the company’s IPO to issue 2,905,000 shares at Rs 100 each, totaling Rs 290.5 million, or 35% of the company’s issued capital.
- The IPO targets both project-affected locals and the general public.
- Himalayan Capital has been designated the issue and sales manager.
Serious Allegations & Ethical Red Flags:
- Conflict of Interest: Shrestha’s direct investment in Bungad Hydropower and his role in approving the IPO constitute a serious breach of ethical norms and regulatory integrity.
- Allegations of Corruption:
- The Independent Power Producers’ Association, Nepal (IPPAN) has accused Shrestha of using intermediaries to solicit bribes—reportedly up to 7% of IPO values—for IPO approval.
- IPO approvals for 89 companies (including 43 hydropower firms) were reportedly delayed for up to 22 months under Shrestha’s leadership.
- Political Appointment Concerns: Shrestha’s appointment has been criticized as politically motivated, particularly over his push to license a new stock exchange, a process stalled due to lack of consensus within SEBON.
Potential Implications:
- Credibility Crisis for SEBON: The approval decision has shaken public and investor confidence in Nepal’s capital market regulator.
- Demand for Investigation: The case has triggered calls from stakeholders, including IPPAN and financial transparency advocates, for an independent investigation into Shrestha’s conduct and SEBON’s IPO approval process.
- Legal & Regulatory Risks: If substantiated, these actions could violate the Code of Conduct for Public Office Holders, as well as securities laws concerning abuse of position for personal gain.
Market Watchers React:
Critics argue that Shrestha should have recused himself from the IPO approval process for Bungad Hydropower, given his stake in the company. The lack of transparency in this case is feared to set a dangerous precedent, particularly in a sector where regulatory capture has already been a persistent concern.
This controversy adds to a string of high-profile governance challenges in Nepal’s financial regulatory institutions and underscores the urgent need for institutional reform, transparency, and robust conflict-of-interest policies within SEBON and other oversight bodies.
