KATHMANDU, June 14: The Finance Committee under the House of Representatives on Friday directed the Securities Board of Nepal (SEBON) not to bar companies with net worth below Rs 90 from issuing their initial public offerings (IPOs).
Earlier on December 29, 2023, the Public s Committee (PAC) of Parliament had directed that companies with a net worth of Rs 90 or less should not be allowed to issue their IPOs. Following the instruction, the SEBON has been allowing IPOs only to those with a net worth of more than Rs 90.
Three weeks ago, SEBON decided to remove 14 listed companies from the lists of its IPO pipeline. These include Apex Hospitality, Orchid Holdings, Annapurna Cable Car, Thamel Plaza Hotel, Richet Jalvidyut Company, Beni Hydropower, Laughing Buddha Power Nepal, Unique Hydel, Puwa Khola-1 Hydropower, Kantipur Television, Sanima Hydropower, Sopan Pharmaceuticals and Prabhu Helicopter.
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This decision of the board courted controversy. The SEBON is said to have taken this decision after the Independent Power Producers’ Association Nepal (IPPAN) alleged the regulator of asking for commission while providing permits to float IPOs by the hydropower companies.
Santosh Chalise, chairperson of the Parliamentary Finance Committee however said they have directed the SEBON to comply with the existing laws while approving the companies’ IPOs. “The SEBON holds the authority to make the final call to decide on the issue,” said Chalise.
An official of the SEBON claimed that the regulator imposed the networth limit of Rs 90 after finding possible anomalies in the primary share issuance by hydropower developers in particular. “Many hydropower developers are seen to be offloading their promoter shares before the maturity of the lock-in period once they issue IPOs through producing fake financial reports to the SEBON,” the source said.
The PAC is said to have introduced the rule of networth threshold aiming to prevent the sale of all the stakes of the promoter shareholders until the debt is repaid. Similarly, the High-Level Economic Reforms Advisory Commission had also recommended the government to permit issuing the IPOs only after the project is operational; stating that floating IPOs during the project construction phase would lead to corruption and defrauding of money of the general public.
