SEBON Tightens IPO Rules for Investment Companies with 8 New Criteria

The Securities Board of Nepal (SEBON) has introduced stricter provisions for investment companies seeking to issue Initial Public Offerings (IPOs). In a recent board meeting, SEBON revised its previous policy framework and has now mandated eight specific criteria that investment companies must meet to obtain IPO approval.

According to the new rules, investment companies must fulfill the following conditions:

1. The company must have been in operation for at least three years and must have recorded profits in the last two fiscal years.

2. The company’s net worth per share must be higher than the face value.

3. The company will only be allowed to invest in securities of organized institutions in specific sectors such as energy, transportation, communication, agriculture, tourism, manufacturing & processing, information technology, and mineral extraction.

4. The company cannot invest in promoter shares or secondary market securities of such sectors unless it has SEBON’s approval as a Qualified Institutional Investor (QII). Even then, it can only participate in IPOs through the book building method.

5. The company must be established with the sole objective of investing in the above-mentioned sectors.

6. The company must have obtained at least one level higher than the minimum required credit rating.

7. The paid-up capital of the company must be at least NPR 500 million.

8. If the company is established with foreign investment, it must comply with the Foreign Investment and Technology Transfer Act.

SEBON stated that these new measures are intended to protect investor interests and ensure greater transparency in Nepal’s capital market. Unqualified companies will now be restricted from raising funds from the public through IPOs under the guise of investment companies.