IPO Pipeline in Nepal Swells to 77 Companies, Dominated by Hydropower Sector

In a significant development for Nepal's capital market, the IPO issuance pipeline under the Securities Board of Nepal (SEBON) has grown to include 77 companies. The surge comes with the addition of 42 new companies since mid-February (Falgun 20), underscoring a growing appetite for public fundraising across sectors.

• Sector Dominance: Hydropower companies make up the bulk of the pipeline, with 37 firms seeking IPO approval. This highlights the sector's reliance on public capital to drive infrastructure-heavy projects. However, this concentration also raises concerns about overexposure in a single sector.

• Sectoral Distribution: Beyond hydropower, 13 companies from production and processing, 15 from miscellaneous sectors, and five from hotel and tourism are in the pipeline. Other sectors, including microfinance (1), microinsurance (4), and investment (2), also feature, reflecting a modest diversification.

• Valuation: The total IPO value in the pipeline stands at NPR 44.75 billion, with 31.78 million shares expected to be issued. While most companies propose shares at the face value of NPR 100, a few are eyeing premium pricing, signaling confidence in their valuation.

The pipeline's growth comes amid a leadership vacuum at SEBON following the departure of former chairperson Ramesh Kumar Hamal. The absence of timely approvals has stalled IPO issuance, potentially delaying billions in market activity and discouraging investor sentiment.

Additionally, the dominance of hydropower companies in the IPO pipeline raises questions about sectoral balance. Over-reliance on one sector may lead to challenges in maintaining a diversified market portfolio, especially if the hydropower sector faces setbacks such as regulatory bottlenecks, delays in project completion, or adverse climate impacts.

Despite challenges, the pipeline represents significant opportunities for retail and institutional investors. Sectors such as production and processing, tourism, and microinsurance could provide long-term growth avenues. Moreover, the inclusion of premium-priced IPOs reflects an emerging trend of companies targeting a more confident and risk-tolerant investor base.

For the IPO pipeline to translate into tangible market activity, SEBON needs to address operational inefficiencies and ensure timely approvals. Additionally, a balanced sectoral representation in IPOs would promote a healthier stock market ecosystem.

As Nepal's capital market evolves, the current IPO pipeline serves as a testament to the increasing reliance on public capital for economic growth. However, its success will depend on regulatory efficiency, investor confidence, and sectoral diversity.
The growing IPO pipeline highlights both progress and potential pitfalls in Nepal's capital market. While hydropower companies continue to lead, the focus should shift toward diversifying sectoral participation to mitigate risks. Moreover, SEBON's leadership vacuum must be urgently addressed to unlock the pipeline's full potential, ensuring the momentum translates into economic development and investor confidence.