New IPO Directive Draft: 90% Hydropower and Industries to be Deprived of Raising Capital
The draft of the General Eligibility Directive for Initial Public Offerings (IPOs), 2083, issued by the Nepal Securities Board, proposes a net worth criterion that would prevent 90 percent of hydropower and industrial companies from obtaining IPO approval. This could make it difficult for these companies to raise capital from the general public. Additionally, the draft proposes a dual policy where the government taxes assets valued under NFRS but disallows their inclusion in net worth, which experts say is unfair to businesses.
Kathmandu. The draft of the General Eligibility Directive for Initial Public Offerings (IPOs), 2083, issued by the Nepal Securities Board (SEBON), proposes certain criteria that appear to create additional difficulties for companies in raising capital.
The board released the draft of the directive on Thursday. The draft proposes a criterion that institutions with a net worth below the par value, i.e., less than 100 rupees, will not be granted IPO approval. Such a blanket provision applied to companies across all sectors could discourage securities issuance.
If this criterion is enforced, 90 percent of hydropower and industrial companies will not receive IPO approval. Because initially, everyone's net worth is below 100 rupees. This could lead to a situation where those companies are unable to raise capital from the general public.
Therefore, experts suggest that net worth should be provisioned sector-wise. 'If done so, it would be fair for such companies and would also facilitate capital raising,' said a market expert.
Similarly, the draft directive proposes a dual policy where financial statements are required under NFRS and the government taxes assets valued accordingly, but disallows their calculation in net worth. 'This policy also appears unfair to businesses,' said the market expert.