The Securities Board of Nepal (SEBON) has announced that it will not approve IPOs of companies with a net worth of less than Rs 90 per share for the time being, although ongoing applications will not be halted.

Mahesh Baral, under-secretary at the Ministry of Finance and acting Chair of SEBON, said during a meeting of the Finance Committee under the House of Representatives that the board will forward the approval process of IPOs except for the companies with a net worth below Rs 90 per share.

“We are maintaining a 'wait-and-watch' approach for companise with net worth below Rs 90 per share," he said.

This follows a previous directive from the Public Accounts Committee, which instructed SEBON not to approve IPOs from companies with a net worth below Rs 90 per share. The directive sparked concern among investors and within the capital market, prompting complaints to the Finance Committee and leading to further discussions.

Baral explained that SEBON is reviewing the financial condition of companies before proceeding with IPO approvals. For financially weaker companies, the board intends to conduct additional assessments before making final decisions.

Padam Giri, a member of the ruling CPN-UML, stressed the need for thorough discussions on the Rs 90 net worth threshold, highlighting the negative impact of approving IPOs of loss-making companies on ordinary investors.

Similarly, Barshaman Pun, a member of the opposition party CPN (Maoist Centre) and former Finance Minister, supported the Public Accounts Committee’s directive. He raised concerns that certain loss-making companies have manipulated regulations to raise funds through IPOs, despite poor financial performance, and questioned who should be held accountable for this. Pun warned that the erosion of trust in regulatory bodies reflects a broader loss of confidence in the state, urging SEBON to act responsibly in safeguarding investors' interests. He also suggested that adopting the book-building method could help prevent manipulation.

The Finance Committee has urged SEBON to prioritise the book-building method when approving IPOs. Other committee members criticised SEBON for losing investor confidence due to past actions, accusing its leadership of failing to take responsibility.

Binod Chaudhary, a member of the ruling Nepali Congress, further criticised SEBON for engaging in manipulative practices that have continually undermined investor confidence. He pointed out that fluctuations in stock prices are natural in any capital market, saying, “Nepal’s stock market rose from 1,800 to 3,000 points within a few days and has since dropped to 2,600. Imposing restrictions based solely on net worth is not the solution; market fluctuations are also driven by sentiment.”

Chaudhary added that discretionary powers have led to issues in IPO approvals and suggested that SEBON’s leadership was selected to facilitate such actions. He emphasised the need for reforms in SEBON and the Nepal Stock Exchange (NEPSE) by adopting practices and regulations followed by international bodies. He also advocated for increasing both domestic and foreign investment in Nepal's capital market.

“If IPOs are issued in line with international practices and regulations, even globally recognised institutions might be attracted to participate,” Chaudhary stated.