Small and medium enterprises (SMEs) with capital below Rs 250 million can now issue initial public offerings (IPOs), following a new regulation enforced by the Securities Board of Nepal (SEBON) on Thursday. SEBON announced that its board has approved the Securities Issuance and Transaction Regulations for Small and Medium Enterprises 2025. According to SEBON spokesperson Niranjaya Ghimire, the regulation took effect immediately and aims to enable small firms to go public.
Under the new arrangement, SMEs are required to issue a minimum of 500 units of primary shares, although this threshold may vary based on the market presence of the SME’s products. Share allotments must be concluded within 15 days of the public subscription’s closing date, and IPOs must be floated within two months of receiving SEBON’s final approval.
To be eligible, SMEs must have operated as a public entity for at least one year and must have completed annual financial audits and general meetings on time. These enterprises are also allowed to issue right shares by following the processes outlined by SEBON. Additionally, they can issue IPOs at a premium price provided they have reported net profits for the past three years and their net worth per share exceeds their paid-up capital.
The regulation caps IPO valuations at a maximum of 49 percent of the SME’s issued capital. Furthermore, a three-year lock-in period applies to primary shares owned by merchant bankers and eligible institutions, starting from the allotment date. While SEBON may require SMEs to obtain credit ratings, they are allowed to issue IPOs even without such ratings.
This regulatory framework is expected to facilitate the participation of SMEs in the capital market, helping them to raise funds and expand their operations.
