When a file is held up for a long time, it not only slows down the company's paperwork, but also disrupts capital planning, business development and expansion, and project construction schedules. It increases project costs, prevents job creation, and weakens investor morale. The government and regulatory bodies should be aware of this issue.
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The Nepali economy has been sluggish for a long time. The economy is currently under pressure from lack of investment, sluggish industry and weak business expansion. Investment in new projects has not been able to increase. Even in such a situation, nearly a hundred companies have tried to expand industries and projects by raising investment from the general public through the capital market. 98 companies are waiting for IPO permission at the Securities and Exchange Board of Nepal.
Those companies have applied for IPO issuance of more than 66 billion rupees. But not getting IPO issuance permission on time means that the private sector will have to postpone capital mobilization of the mentioned amount. When the country is not becoming investment-friendly and the self-confidence of the private sector is weak, stopping IPO permission is also not beneficial for the economy. Therefore, the Securities and Exchange Board of Nepal should immediately decide on the application submitted by the IPO issuing companies.
The 98 companies that have applied to the board for IPO want to sell 442 million 72 thousand 132 shares to the general public. Of these, 26 companies in the production and processing sector have sought permission to issue IPOs worth Rs 34.23 billion 58 million 35 thousand, 32 hydropower projects have sought permission to issue IPOs worth Rs 15.54 billion 73 million 55 thousand, and 18 companies in the hotel and tourism sector have sought permission to issue IPOs worth Rs 6.45 billion 13 million. Five companies under the investment group are issuing shares worth Rs 3.41 billion 60 million 37 thousand, three microinsurance companies Rs 675 million and 14 companies in other sectors are issuing shares worth Rs 5.90 billion 99 million 20 thousand. If these companies do not receive timely permission, their capital planning cycle will be affected.
Public Limited Companies plan to issue IPOs for two main purposes: to raise capital and to make citizens shareholders in the company. According to this plan, after issuing the IPO, they take short-term loans from banks on the condition of repaying the loans. Since they did not receive timely permission from the Securities and Exchange Board of Nepal, these companies are currently unable to issue IPOs. However, many companies have already taken loans from banks by showing IPOs. But since the IPO has not been issued, the banks are now having to face pressure to repay the loans.
The responsibility of the regulatory body is to make the market disciplined and reliable. But problems arise when the difference between regulation and obstruction is not understood. If the company has violated the standards, the documents are incomplete, and the financial condition is weak, it should be corrected. However, the practice of holding any file for a long time without a decision does not create transparency, but suspicion. On the other hand, there is a legal provision that requires a 'credit rating' before issuing shares exceeding a certain amount. Along with that, underwriting (an agreement that I will buy the shares if they are not sold) must also be done. The period of underwriting once done is only for 6 months. Due to the non-permission to issue shares, the company/project has to re-underwrite every 6 months. Industrialists complain that this has caused huge financial losses. This is not a situation that can be ignored.
When a file is held for a long time, it not only delays the company's paperwork, but also disrupts the capital plan, business development and expansion, as well as the project construction schedule. It increases the cost of the project, prevents job creation, and weakens the morale of investors. The government and regulatory bodies should be aware of this issue.
Not everyone who seeks IPO permission should get permission immediately. The Securities and Exchange Board of Nepal is responsible for making decisions such as which companies to allow for IPO and when. Being the regulatory body of the capital market, it is the board's job to make the market clean, transparent, and well-governed. Along with this, the board is also responsible for protecting the assets of investors by making the capital market effective. The board should be able to prevent irregularities in the market and create a cycle of uninterrupted supply of shares while protecting the assets of investors.
The responsibility of the regulatory body is to make the market disciplined and trustworthy. But problems arise when the difference between regulation and obstruction is not understood. If a company has violated the standards, the documents are incomplete, or the financial condition is weak, it should be made to correct them. However, the practice of holding any file for a long time without a decision creates suspicion, not transparency. The situation has been further complicated by allegations of influence, access, and self-interest in the IPO approval process. Earlier, energy producers had publicly accused the authorities of asking for commissions. Although the Authority has started an investigation, the lack of conclusions has increased confusion. Overall, when trust in the regulator weakens, it affects the entire capital market.
Even after nearly three and a half decades of its formal launch, Nepal's stock market is still stuck in a limited structure. In a market dominated by banks and financial institutions and insurance companies, the need to increase the participation of the manufacturing industry, tourism, and energy sectors is old. But the goal of market diversification has been further pushed back as the process of new company entry is being blocked.
In conclusion, the need of the hour is not to leave the permit open, but to make the process credible. The securities market cannot mature without clear criteria, digital tracking, deadlines and public accountability. This is the time for the regulator to transform itself into an institution that facilitates capital formation rather than a controlling body. Trust in the capital market is not built by just increasing the NEPSE index. It is built through the impartiality of the regulator, transparency of decisions, proactivity and credibility of the process. The Securities and Exchange Board of Nepal should be serious in this regard.
