Kathmandu, July 27: Nepal’s securities regulator, the Securities Board of Nepal (SEBON), is preparing to revise IPO issuance rules, raising the minimum public offering requirement from 10% to 20% of a company’s issued capital. The change aims to ensure broader public ownership and reduce the dominance of founding shareholders.
Currently, companies can issue IPOs ranging from 10% to 49% of their capital. After the amendment to the Securities Issuance Regulation, the new floor will be 20%, with the upper limit unchanged at 49%. SEBON is expected to finalize and enforce the updated rules within the Nepali month of Shrawan (ending mid-August).
At present, some companies issue just 10% of shares to the public, keeping the rest within a small group of promoters. Once the minimum threshold rises to 20%, more shares will reach ordinary investors, while the stake of promoters will be diluted accordingly.
Banks, financial institutions, and insurance companies are already mandated to issue at least 30% of their capital to the public. However, hydropower and service-oriented companies are allowed to go public with just 10%. SEBON is also set to impose stricter rules on the lock-in period for hydropower promoters’ shares.
Under the current policy, hydropower developers can sell all their shares three years after the project begins operation. The proposed revision, however, would allow them to sell only two-thirds (66%) of their holdings after three years. The remaining one-third (33%) can be sold only after the project’s debt has been fully paid off — a process that often takes up to a decade.
The new provision would extend the lock-in period on 33% of promoters’ shares to ensure financial responsibility, especially since promoters usually provide personal guarantees for project loans. Moreover, SEBON plans to restrict IPOs by hydropower firms until after they commence commercial electricity generation (COD).
These reforms align with recommendations by the High-Level Economic Reform Advisory Commission led by former finance secretary Rameshwor Prasad Khanal, which the government has officially endorsed.
People’s News Monitoring Service
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