IPO Issuance in Nepal: Regulatory Framework and Mandatory Provisions from National Budget

Kathmandu, May 23 – As Nepal’s capital market continues to expand, Initial Public Offerings (IPOs) have emerged as a vital route for companies to raise funds from the public. Under the regulatory oversight of the Securities Board of Nepal (SEBON), public limited companies in Nepal can offer shares to the general public, but only after fulfilling a stringent set of legal and financial requirements.

To be eligible to issue an IPO in Nepal, a company must be registered as a public limited entity with a minimum paid-up capital of NPR 100 million. Additionally, it must have at least seven shareholders and obtain a credit rating from an authorized credit rating agency. One of the key regulatory mandates includes preparing a comprehensive prospectus detailing financials, objectives, risks, and management, which must be approved by SEBON before launching the IPO.

Companies are also required to appoint a licensed issue manager to handle the IPO process. As per SEBON’s regulations, at least 20% of a company’s total share capital must be offered to the public during the IPO.

Beyond regulatory guidelines, the Government of Nepal, through the national budget for the fiscal year 2079/80 (2022/23), introduced mandatory IPO issuance for specific categories of companies. According to this budgetary provision, companies that meet the following criteria are now legally obligated to go public:

• Companies with a paid-up capital exceeding NPR 1 billion

• Companies with annual transactions above NPR 5 billion

• Companies that utilize natural resources or benefit from government incentives or subsidies

This policy aims to enhance financial transparency, promote public accountability, and widen investor participation in businesses that significantly impact the economy or benefit from public resources. It also aligns with Nepal’s broader objective of deepening and institutionalizing its capital market.

Following the announcement, many companies that fall under these criteria have begun preparations to list on the Nepal Stock Exchange (NEPSE). Experts believe that this move will not only improve corporate governance but also open up new investment opportunities for the general public.

In conclusion, IPOs in Nepal are not just a financial instrument but a policy-backed tool to foster greater transparency and democratize corporate ownership. With regulatory checks from SEBON and policy pushes from the national budget, the future of Nepal’s capital market appears poised for more structured and inclusive growth.