The Finance Committee under the House of Representatives has termed the Public Accounts Committee’s directive barring the Securities Board of Nepal (SEBON) from approving initial public offerings (IPOs) of companies with a per-share net worth below Rs 90 as flawed, and has instructed the regulatory body to proceed with such IPO issuances.

The decision followed extensive discussions after SEBON had stopped approving such IPOs, citing the Public Accounts Committee's instruction on inadequate net worth. On Thursday, the Finance Committee finalized its stance and issued a directive to SEBON, according to committee secretary Rekha Upadhyaya Khanal.

"The committee took the decision based on the discussion held on June 2 regarding IPOs of companies with net worth below Rs 90 per share. Subsequently, we instructed SEBON not to block such IPOs," Khanal told New Business Age .

The committee concluded that the Public Accounts Committee’s directive lacked a legal basis and instructed SEBON to operate in line with existing laws. After seeking clarification from SEBON, the Finance Committee learned that no legal provision mandates a minimum net worth threshold for IPO approval. It therefore determined that the Rs 90-per-share condition was not legally enforceable and instructed SEBON to approve IPOs regardless of whether a company’s net worth per share falls below that figure.

The committee also requested a list of companies with net worth under Rs 90 per share. SEBON has primarily been withholding IPO approvals from hydropower companies under this provision. Business groups have long urged a review of the directive. Finance Committee Chairperson Santosh Chalise has publicly opposed setting a fixed net worth threshold, and the committee’s recent letter to SEBON reflects that view.

A senior SEBON official said the board would discuss and make a decision once it formally receives the directive. "We haven’t received the letter yet. Once it arrives, we will review it and take appropriate action," the official told New Business Age .

Meanwhile, a letter SEBON sent to the Electricity Regulatory Commission regarding IPO approval has sparked further debate. The letter, registered with the commission on May 16, reads: “In light of the directive issued by the Public Accounts Committee on December 28, 2023, which instructs SEBON to allow IPOs only for companies with a real net worth above Rs 90 per share without re-evaluation, the Commission is requested to consider this directive while granting pre-approval to institutional entities for IPOs.”

After SEBON Chairperson Santosh Narayan Shrestha sent the letter, the commission held discussions with energy promoters on Thursday. During the meeting, industry representatives stressed that IPOs should not be restricted based solely on net worth. The commission reportedly showed a positive response to the private sector’s concerns.

Energy promoters have been lobbying chief whips of major political parties, urging a review of the Public Accounts Committee’s decision to ensure smoother IPO issuance to the general public.

Currently, 36 hydropower companies are in SEBON’s IPO pipeline. Of these, five have been dropped for not meeting the Rs 90 net worth requirement. SEBON has yet to decide on IPO applications submitted after August 30, 2023. In 2023 alone, 16 hydropower companies applied for IPO approval, but none have received a decision, significantly affecting the energy sector.