The number of companies seeking approval for initial public offering (IPO) from the Securities Board of Nepal (SEBON) continues to rise, but the board has been slow in granting approvals.

Currently, 84 companies are awaiting IPO approval, including seven from the hotel and tourism sector, 44 from hydropower, three from investment, 15 from production and processing, one from microfinance, three from microinsurance, and 11 from other sectors. In total, 372.64 million shares and 25 million units are in the IPO pipeline.

Despite the growing backlog, SEBON has approved only five IPOs since the start of the current fiscal year. The last company to receive approval was Pure Energy on February 14, but it has yet to issue shares to the general public. The company completed its IPO issuance for project-affected locals and Nepalis working abroad between March 4 and March 18. 

The slowdown in approvals began after the Public Accounts Committee (PAC) of the House of Representatives directed SEBON to approve IPOs only for companies with a net worth exceeding Rs 90 per share. The directive, issued on December 28, 2023, followed concerns that IPOs were being granted too easily to financially weak companies.

Another factor contributing to the delay is the absence of a SEBON chairman. SEBON spokesperson Niranjaya Ghimire stated that approvals are stalled as SEBON is working to verify the actual net worth per share of applicants in line with the PAC directive. Companies already in the pipeline were asked to submit updated financial statements, but delays in submission have further slowed the process.

A senior official from SEBON’s regulatory department noted that many hydropower companies, which make up the largest share of IPO applicants, have been slow in providing their most recent financial statements. Some of these companies’ net worth has declined since their initial application, keeping them in the queue for an extended period.

The prolonged delays have frustrated companies, especially those in the hydropower sector. The Independent Power Producers Association of Nepal (IPPAN) wrote to the PAC on February 21, urging it to reconsider its directive and allow IPO approvals based on existing legal provisions. However, SEBON has not received any further instructions from the committee.

To address inefficiencies in the IPO process, SEBON is revising the Securities Registration and Issuance Regulations and the Book Building Guidelines. In December, it formed a five-member study committee to review the Securities Registration and Issuance Regulations, 2016, and the Book Building Guidelines, 2020.

Meanwhile, SEBON has not approved any IPO at a premium price or through the book-building method in recent months. The controversy surrounding the IPO of Reliance Spinning Mills, which received approval through the book-building method, prompted the board to revise its approach.

As delays continue, SEBON officials have advised companies to ensure financial stability before applying for an IPO, emphasizing their responsibility to protect general investors' interests.