The Independent Power Producers’ Association Nepal (IPPAN) has requested the Finance Committee to reconsider the Public Accounts Committee (PAC)’s decision to bar companies with a net worth of less than 90 from issuing IPOs.

IPPAN President Ganesh Karki, in a letter to Finance Committee Chairman Santosh Chalise on Friday, urged him to take the initiative to review the PAC’s decision. In the letter, Karki explained that the directive has halted IPO issuance and capital raising.

On December 28, 2023, the PAC instructed the relevant government bodies to prohibit companies with a net worth of less than 90 from issuing IPOs. It also directed that companies cannot sell one-third of their shares until they fully repay their debt.

According to IPPAN, the PAC’s directive has stalled the IPOs of 43 companies.

Karki stated in the letter that the Securities Board of Nepal (SEBON) has no regulation specifying a minimum net worth requirement for issuing an IPO. However, the PAC’s directive has made IPO issuance problematic. He also pointed out that the provision prohibiting the sale of one-third of shares contradicts existing laws.

Karki further mentioned that project promoters and company directors cannot exit a project until they repay their debt, as personal guarantees are provided. If this provision is enforced, it will bind hydroelectric project promoters to a single project for life, negatively impacting the investment climate in the sector.

This restriction will also lead to a shortage of investment funds, as capital cannot be raised. Banks are struggling to issue further loans due to the IPO restrictions, creating challenges for the overall project development process.

IPPAN accused the PAC of overstepping its jurisdiction, stating that its directive has created confusion in the project construction process. The organization had previously written multiple letters to the PAC, urging it to reconsider the decision.

Source: Republica