Companies awaiting approval from the Securities Board of Nepal (SEBON) are likely to face further delays in the IPO process. The board announced that it will only approve IPOs based on audit reports from the last fiscal year (FY) 2023/24, which could prolong the approval process further.
At a recent event, Mahesh Baral, a representative of the Ministry of Finance currently serving as the temporary chairman of the board, stated that IPO approvals will be based on financial statements from FY 2023/24.
"Once we receive the annual audit reports from the companies that applied for IPOs, we will proceed with the approval process," Baral explained during the event organised by the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) for World Investors Week 2024. He emphasized the need for updated financial statements, as previous reports do not accurately reflect the current net worth per share of these companies.
Currently, 35 companies are waiting for IPO approval, many of which have filed their applications on the basis of financial statements from the previous year, FY 2022/23, causing the delay.
Baral also clarified that the board will not permit companies to issue only 10 percent of their paid-up capital to the general public. He stated that companies seeking IPO approval during his tenure must propose a share issuance of more than 10 percent. While the law allows for public issuance of 10 to 50 percent of shares, the board will deny approval to those opting for the minimum of 10 percent.
Recently, the board permitted Reliance Spinning Mills Limited to issue shares via a book-building method on June 26. However, this approval is currently stalled due to controversies regarding the company's inflated share price.
The Public Accounts Committee of the Federal Parliament instructed the board not to approve IPOs for companies with a net worth below Rs 90 per share, and many of the companies awaiting approval fall below this threshold.
The position of chairman of SEBON has been vacant since January 5. Although the process to appoint a new chairman began on January 17, it remains vacant even after nine months. Following amendments to the Securities Act last March, a Joint Secretary from the Ministry of Finance has been assigned to the role of Board’s chairman. There have been three changes in the ministry’s representative during this vacancy. As of July 18, Mahesh Baral has been serving as both the ministry's representative on the Board of Directors and the acting chairman.