The number of companies applying to the Securities Board of Nepal for initial public offering (IPO) has reached 98. The list of companies that have applied and are waiting for their turn has reached 98 due to the absence of the Securities Board chairman in the past, long-term employee agitation, and many companies not getting permission to issue shares under various pretexts even after the outgoing chairman Santosh Narayan Shrestha came. 

These companies are in the process of getting permission from the board for an IPO worth 66.23 billion 55 million rupees. There is a legal provision that these companies have to issue shares within two months of receiving permission from the board. Stakeholders complain that the company's capital increase project has been stalled due to not receiving permission to issue shares from the board for a long time, and that the project construction and business expansion have not been able to be carried out. 

Uttam Vlon Lama, Vice President of the Independent Power Producers Association (IPPAN), said that the project has a resource problem due to not being able to issue shares on time. "When we submit the capital plan to the bank, we promise to invest 70 percent of the capital now, and sell the remaining 30 percent to locals and the general public within a certain period," he said. "The project has been stalled for a long time due to the failure to issue the IPO on time. Banks are insisting that the IPO will not go ahead and that the remaining 30 percent must be invested anyway. This has added more problems to the project construction."

According to hydropower promoters, after issuing an IPO, a project takes a short-term loan from a bank on the condition of repaying the loan. They say that these companies have not been able to issue an IPO, and now the bank is under pressure to repay the loan. There is a legal provision that even hydropower projects must undergo a 'credit rating' before issuing shares. Along with that, underwriting (an agreement that I will buy the shares if they are not sold) must be done. The period of underwriting once done is only for 6 months. Vice Chairman Lama said that the project has suffered a huge financial loss as the Securities and Exchange Board of Nepal (SEB) has not given permission to issue shares for a long time, and has had to re-underwrite every six months. 

According to the board, 98 companies have sought permission to issue 442.172 million shares (IPO) to the general public. Of these, 26 companies in the production and processing sector are in the process of issuing 155.262 million shares worth 34.2358 million 35 thousand rupees. 32 hydropower projects have applied to the board to issue 151.926 million shares worth 155.5473 million 55 thousand rupees. 

Similarly, 18 companies in the hotel and tourism sector have applied to issue 58.213 million shares worth 6.451 billion 13 million rupees in IPO. Five companies under the investment group have applied to issue 21,13,750 units of IPO worth 3.416 billion 37 million rupees. Three micro-insurance companies have applied to issue 48,621,069 units of shares worth 5.909 billion 99 million 20 thousand rupees with the Securities and Exchange Board of Nepal. 

Stakeholders say that the capital planning schedule of the hydropower project has been disrupted due to not receiving permission to issue shares for a long time and this has created problems in the company's overall capital system. When investors build a project, they are told to invest 70 percent of the capital themselves and raise the remaining 30 percent through share sales (equity). Out of this, 10 percent of the shares are distributed to the project-affected locals. 20 percent are distributed to other general public. However, they say that the project's work has been affected due to the failure to raise money according to this schedule. 

The outgoing president of the Federation of Nepalese Chambers of Commerce and Industry, Chandra Prasad Dhakal, says that the Securities and Exchange Board of Nepal should not have stopped the IPO permission. He said that projects and businesses will be affected if IPO permission is not granted for a long time. 

Birendra Raj Pandey, President of the Confederation of Nepalese Industries (CNI), also said that the establishment of new industries and the commercial expansion of old ones have been affected due to the long delay in obtaining IPO permission.  ‘Currently, industries are operating at less than half their capacity.  There is no environment for additional investment, in such a situation, the capital plans of the companies have been stalled due to the lack of IPO permission on time,’ he said. 

Kamlesh Kumar Agrawal, President of the Nepal Chamber of Commerce, said that the share issuance process should not be stopped by obstructing it. ‘We have been repeatedly raising the issue of the IPO permission being withheld. We met the Finance Minister only last week and informed him about this,’ he said, ‘There is no obstruction in the supply of shares, the trend of withholding permission without any decision is wrong.’ He said that in the current situation, the Securities and Exchange Board of Nepal should facilitate companies along with regulatory compliance.

Securities Board officials claim that there has been no delay in the approval process for companies that have submitted all the documents as per the criteria. Securities Board spokesperson Niranjay Ghimire said that companies that have submitted all the documents and procedures as per the criteria are getting share issuance permission. “There has been no delay in IPO approval except in cases where the necessary documents have not been submitted,” he said. He also said that new criteria have been formulated to be implemented from this Baisakh to make the IPO issuance process faster and more realistic. 

The IPO approval process was stopped after the Securities Board became chairmanless in Poush 2080. The government appointed Santosh Narayan Shrestha as chairman on 10 Mangsir 2081. He resigned after about a year and a half on 4 Baisakh. Stakeholders say that very few companies received share issuance permission during his tenure. Energy producers had accused him of asking for commission for IPO permission by holding a public program. The Commission for the Investigation of Abuse of Authority had also started an investigation into the matter. However, the commission has not yet filed a case. Energy producers still have the impression that former Chairman Shrestha only allowed IPOs to companies in which he, his family members, relatives, and business partners had invested during his tenure, according to IPPAN Vice Chairman Lama. Former Chairman Shrestha has been challenging the allegations to be confirmed. He claims that companies that had completed the due process and submitted the necessary documents while he was on the board are getting IPO approval. 

Currently, the process is being taken forward only for companies with a net worth of more than Rs 90 per share, have applied to issue shares at face value, and have no disputes, an official of the board said. Earlier, the Public Accounts Committee of Parliament had directed not to proceed with the share issuance process of companies with a net worth of less than Rs 90. As of mid-2082 Falgun, the number of companies listed on the Nepal Stock Exchange Limited was 286. In 2081 Falgun, the number of companies listed was 268. Among the listed companies, 133 are banks and financial institutions and insurance companies. There are 97 hydropower companies, 27 manufacturing and processing industries, 8 hotels, 7 investment companies, 4 trading institutions and 10 other groups.