Kamal The Securities Board of Nepal (SEBON) has taken a firm stance under its new leadership. The board has decided not to allow Initial Public Offerings (IPOs) for companies with a net worth of less than NPR 90 per share. This decision, based on directions from the Public Accounts Committee of the Parliament, has triggered serious challenges, especially for hydropower companies still in the construction phase.
IPO Restrictions Based on Net Worth
SEBON has stopped granting IPO permissions to companies whose net worth is below NPR 90. This policy mainly affects hydropower companies, as most of them in the development stage have a net worth lower than the required limit.
Due to this restriction, only 13 companies have received approval for IPO issuance in the current fiscal year. This is a significant drop compared to previous years.
IPO vs. Right Share Approval Status
| Category | Number of Companies | Net Worth Criteria Followed |
| IPO Approved Companies | 13 | Yes (≥ NPR 90) |
| Right Shares Approved | 17 | No (Net Worth below 90 allowed) |
| Hydropower in Right Shares | 11 out of 17 | 9 have net worth < NPR 100 |
| Companies with Net Worth < NPR 70 | Multiple | Still approved for the right shares |
Net Worth Double Standard
Interestingly, while SEBON is strict about the net worth threshold for IPOs, it has shown leniency when it comes to rights share issuance. Among the 11 hydropower companies approved for right share issuance, only 2 have a net worth above NPR 100. The rest have a net worth below that, some even below NPR 70.
This raises questions about double standards in regulatory practices. If the same net worth rule applied to rights shares, most of these companies would not qualify to raise funds.
Low Net Worth Hydropower Companies Approved for Right Shares
| Company Name | Symbol | Net Worth per Share (NPR) |
| Joshi Hydropower | JOSHI | 68.83 |
| Khanikhola Hydropower | KKHC | 69.96 |
| Liberty Energy | LEC | 72.36 |
| Balephi Hydropower | BHL | 76.45 |
| Chyangdi Hydropower | CHL | 76.94 |
| Terhathum Power | TPC | 80.65 |
If the IPO standard were applied to rights shares, these companies would not be allowed to issue additional shares in the market.
Market Concerns and Investor Views
Many large investors in the market believe that the right share issuance is being misused. They say it has become a tool for manipulating the market. Companies with poor financial health are raising funds without delivering value, which hurts small investors the most.
An investor says:
“We invest in the market to earn. Issuing rights shares just to collect more money from investors, especially from low net worth companies, is wrong. This must be stopped immediately to protect retail investors.”
Conclusion
SEBON’s move to limit IPOs from low net worth companies is a step toward improving market quality. However, allowing these same companies to issue rights shares raises serious concerns. If fair practices and consistent rules are not enforced, investor trust could suffer. A unified standard for both IPOs and rights issues is necessary to protect investor interests and promote long-term market health.
