Nepal's IPO Queue Reaches 117 Companies as Rs 71.42 Billion Awaits Approval

Most applications are still near the starting line

Nepal's Securities Board has 117 companies waiting to sell shares to the public, with applications covering 510,981,946 shares worth more than Rs 71.42 billion. Its newly published breakdown shows where the queue is stuck: 82 companies, about 70% of applicants, remain in the first two of six review stages. Only two have reached final review.

The Securities Board of Nepal (SEBON) approved just one initial public offering after April 15, following a gap of nearly six months. An initial public offering, or IPO, is a company's first sale of shares to public investors. Companies receive money to finance their businesses, while buyers acquire an ownership stake.

The slowdown affects more than prospective stock market investors. Manufacturers that converted into public companies are waiting to raise capital, hydropower developers say their financing plans have been disrupted, and residents around power projects cannot buy the shares reserved for them until approval arrives.

SEBON says applications must satisfy financial, legal and management requirements, and that submitted documents still need verification. Companies counter that lengthy reviews force them to update financial statements repeatedly while their applications remain pending.

Six stages show how far applications have progressed

SEBON has, for the first time, divided its IPO applications into six procedural stages. The classification gives applicants and investors a more detailed picture than a single list of companies awaiting permission. It also shows that the queue contains businesses at very different points in the review process.

• Stage one: 76 companies, seeking to issue 280,822,313 shares.
• Stage two: six companies undergoing initial review.
• Stage three: four companies asked to make corrections or provide further details.
• Stage four: 19 companies whose responses to SEBON's queries have been received, covering 119,878,595 shares.
• Stage five: 10 companies whose responses and revised documents are under review, covering 51,904,701 shares.
• Stage six: two companies undergoing final review, covering 2.9 million shares.

Maruti Cement, Ambe Steels and Riddhi Siddhi Cement are among the companies in stage one. Akama Hotel and Apex Makalu Hydropower are among those in stage two. The first stage alone accounts for about 55% of all shares awaiting approval, calculated from 280.82 million out of 510.98 million shares.

SEBON has sent requests for corrections or additional information to Mahashakti Cement, Shubhashree Agni Cement, Jasmine Paints and Laxmi Technoplast, the four companies in stage three. Stage four includes Dish Media Network, Jagdamba Steels, Saurya Cement and HAMS Hospital. These companies have responded to the board's queries and are waiting for the next assessment.

Two companies reach the final review

Ashutosh Energy and Kantipur Pharmaceuticals Lab are the two companies furthest along. Ashutosh seeks permission to issue 1.2 million shares worth Rs 120 million, with NMB Capital managing the sale. Kantipur seeks to issue 1.7 million shares worth Rs 170 million through Muktinath Capital.

Their combined proposed fundraising is Rs 290 million. SEBON still has to complete its checks of the documents, financial information, prospectuses and regulatory requirements before deciding whether to approve them. No approval date has been announced.

NC Agrotech Industries, Sanima Hydropower, IME Limited and Siuri Nyadi Power are among the 10 companies in stage five. For investors, the classification provides a way to distinguish companies still answering initial questions from those approaching a decision.

Why completed paperwork still means more checks

SEBON's procedural information indicates that about a dozen companies have submitted all required documents. Nine have also met the latest requirement for net worth per share of at least Rs 100. They are Sanima Hydropower, IME Limited, Richet Hydropower, Him River Power, Hilton Hydropower, Habitat Power, NC Agrotech, Ashutosh Energy and Kantipur Pharmaceuticals.

All nine have applied to sell shares at a face value of Rs 100. Their reported net worth per share ranges from Rs 105 to Rs 263.61. Face value is the nominal amount assigned to a share. Net worth per share is broadly the company's assets minus its liabilities, divided by its shares. SEBON uses the latter figure as one financial test.

SEBON spokesperson Niranjay Ghimire said the regulator must examine the information behind the paperwork and sometimes visit projects.

Completing the paperwork alone is not enough. We also have to verify the information contained in those documents.

Merchant bankers handling 76 applications have been asked for updated information. SEBON wants objective assessments of financial and management conditions, checks for conflicts of interest, and compliance reports supported by audited financial statements for fiscal year 2082/83 or statements certified by an auditor.

Manufacturers seek half the money in the queue

Manufacturing and processing companies account for the largest amount of proposed fundraising: Rs 35.71 billion across 32 applicants. Hydropower has more applicants, 39, but a smaller combined request of Rs 19.09 billion.

Using the Rs 71.42 billion total, manufacturers seek about 50% of the money in the queue, compared with roughly 27% for hydropower companies. Together, the two sectors account for 71 of the 117 applicants and about 77% of the proposed fundraising.

The manufacturing applications also represent a substantial potential expansion in the sector's stock market presence. Eighteen manufacturing and processing companies are currently listed on the Nepal Stock Exchange. Another 32 are seeking approval to issue IPOs, nearly 1.8 times the number already listed.

In 2016, SEBON allowed companies in the real and manufacturing sectors to enter the market by selling just 10% of their shares to the public. The policy aimed to broaden the market's industrial representation, encourage transparent accounts, increase tax collection and make business ownership available to more people.

Some manufacturers subsequently converted from private to public companies and reorganised their financial reporting. For those now waiting, the delay interrupts a transition that regulatory policy had encouraged.

Companies describe a cycle of expired paperwork

A founding shareholder of one applicant said companies submit documents based on their financial statements, wait without a decision, and then face requests for updated statements when another financial year begins. The shareholder said replacement documents also remain pending.

The complaint identifies a practical cost of a lengthy review: a company can spend money and management time keeping an application current while still being unable to raise the planned capital. SEBON's response is that the underlying figures and business conditions require verification before investors are invited to buy shares.

The queue also includes three microinsurance companies. Regulatory provisions require banks, financial institutions and insurers to issue 30% of their shares to the public. Their applications therefore sit within a wider tension between requirements to broaden ownership and the separate process for approving a public share sale.

Hydropower faces a question about its business lifespan

SEBON Chairperson Dr Gopal Prasad Bhatt has questioned whether an IPO is suitable for every business seeking one. His concern is especially relevant to companies whose main operations are tied to a project with a limited operating period.

Bhatt said companies must satisfy the board's criteria before turning to the public for capital.

Companies must meet certain criteria to issue an IPO. An IPO may not be the right way for every company to raise capital.

For hydropower, Bhatt pointed to what happens when project ownership passes to the government after 30 years. He asked what business would remain in the company and what would happen to shares held by public investors. Those concerns put the company's business after the transfer, as well as its current financial position, at the centre of the review.

SEBON says it will assess hydropower applicants against its published requirements rather than approve every project seeking an IPO. Its checks include net worth per share and the commercial operation date, meaning the date a project begins producing electricity commercially.

Bhatt also said some earlier policy provisions may need revision as circumstances change. The board is focusing on updating the regulatory framework, placing applications under review while it reassesses parts of the system governing them.

Developers need capital before electricity sales begin

Mohan Kumar Dangi, president of the Independent Power Producers' Association, Nepal (IPPAN), said some hydropower projects have already been completed while their IPO applications remain pending. Developers include expected public share proceeds in their investment plans, he said, so the timing of approval affects how those plans work.

Dangi described the gap between the construction period, when a project consumes money, and the operating period, when it begins earning revenue.

Once a project is completed, it starts generating commercial revenue. Capital is needed while the project is being built.

A share sale arriving after construction changes the timing of funding that developers had expected to receive earlier. Dangi urged SEBON to state its policy explicitly rather than leave hydropower companies waiting indefinitely.

Energy entrepreneurs also contrast the approval slowdown with the government's target of generating 30,000 megawatts of electricity within 10 years. Their complaint is that public agencies are delaying a financing route included in project investment plans while the government seeks a large expansion in generation.

Local residents must wait for their reserved shares

The Securities Registration and Issue Regulations require hydropower companies to reserve up to 10% of issued capital for residents of areas affected by their projects. Where an environmental impact assessment divides those areas into categories, the share allocation must give priority according to that classification.

Companies can offer these shares only after receiving SEBON's IPO approval. A pending application therefore also delays the opportunity for affected residents to invest in a nearby project.

The local allocation connects approval decisions to communities as well as company financing. Residents covered by the rules remain unable to subscribe even when a developer has completed construction and started generating electricity.

How the slowdown developed

The dispute brings together an earlier effort to attract more businesses into the stock market, a long pause in approvals and a new attempt to explain the review queue. The main milestones are:

• 2016: SEBON opened a route for real and manufacturing sector companies to enter the market by selling 10% of their shares to the public.
• April 15 onward: only one company subsequently received IPO permission during the period described, following a gap of nearly six months.
• October: the single approval interrupted the long pause.
• The latest procedural disclosure: SEBON divided 117 pending applications into six stages, with two companies in final review.

The next decision rests with SEBON's assessment of individual applications. For applicants, the immediate issue is whether financial checks, responses to queries and any project inspections can be completed in time for the money to serve their financing plans. For investors and affected residents, it is when a proposed share sale will become an approved opportunity to subscribe.

Key Points

• SEBON has 117 IPO applications covering about 510.98 million shares worth more than Rs 71.42 billion.
• About 70% of applicants remain in the first two review stages.
• Ashutosh Energy and Kantipur Pharmaceuticals Lab are in final review, seeking a combined Rs 290 million.
• Manufacturing and processing companies seek Rs 35.71 billion, about half the total.
• Hydropower developers say delays disrupt financing plans and prevent offers of shares reserved for affected residents.
• SEBON says financial verification, complete documents and compliance with legal requirements must precede approval.