Kamal Nepal’s Securities Board (SEBON) is facing confusion over IPO approvals due to conflicting directives from the Office of the Auditor General (OAG) and the Finance Committee. The issue centers around whether companies with a per-share net worth below NPR 90 should be allowed to issue IPOs.
Background
On Jestha 5, 2082 (May 18, 2025), SEBON removed 14 companies from its IPO pipeline, citing net worth concerns. Thirteen of these were dropped because their net worth per share was below NPR 90.
The decision was based on a directive sent by the OAG in Poush 2080, advising SEBON not to approve IPOs of such companies. SEBON has since followed this instruction and rejected multiple IPO applications.
Conflicting Directions
However, the Finance Committee sent a contradictory letter to SEBON on Jestha 19, 2082, stating there is no legal provision that bars companies with less than NPR 90 net worth from issuing IPOs. The committee instructed SEBON to act based on existing legal frameworks.
This contradiction has created a policy deadlock for SEBON. An official from the board confirmed they have sent another letter to the Finance Committee seeking clarification, noting,
“We can’t ignore instructions from either parliamentary committee, but the guidance we’ve received is clearly inconsistent.”
Market Concerns and Opinions
Energy sector representatives argue that companies, especially hydropower developers, should be allowed to issue IPOs despite having low net worth. According to IPPAN President Ganesh Karki,
“It is a legal requirement to offer shares to local communities affected by hydropower projects. Denying this would hinder investment in the sector.”
Capital market expert Dr. Gopal Bhatt emphasized that SEBON, not the Auditor General, should define IPO eligibility criteria. He said:
“The role of setting IPO standards lies with SEBON. The OAG lacks capital market expertise.”
What’s Next?
SEBON is now working on amending the Securities Registration and Issuance Regulations to introduce clear IPO eligibility standards. The new guidelines may include net worth thresholds as one of several indicators to prevent weak companies from entering the capital market.
Why It Matters
The absence of clear and legally grounded IPO criteria has raised concerns about transparency, regulatory overlap, and market abuse. While SEBON moves to set formal standards, investors and companies remain in limbo.
