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  SEBON Accused of Dodging Allegations as IPO Halt Enters 20th Month

The Securities Board, accused of taking commissions in the issuance of IPOs for hydropower projects, has responded only through press releases.

Although Board Chairman Santosh Narayan Shrestha has been accused of taking up to 7% commission through middlemen, the board has merely issued a general statement to deflect the allegations. It has not explained why IPO approvals have been stalled for the past 20 months. Nor has it been able to clarify why only certain companies were suspiciously granted permission to issue IPOs.

After complaints grew that SEBON (Securities Board of Nepal) had started demanding commissions ranging from 5 to 7 percent for IPO issuance, energy promoters held a discussion on Tuesday. During the meeting, the promoters stated that they could not afford to pay bribes and even discussed the possibility of approaching the Commission for the Investigation of Abuse of Authority (CIAA).

According to one energy promoter, the meeting held today included talks about filing a complaint against SEBON with the CIAA. The meeting was prompted by intermediaries approaching promoters, claiming they could facilitate IPO approvals. Promoters allege that SEBON approved IPOs for certain companies in exchange for money. They further claim that individuals going around the market posing as close associates of SEBON Chairman Santosh Narayan Shrestha are acting as intermediaries.

The meeting was convened after growing complaints that SEBON had been demanding bribes ranging from 5 to 7 percent through intermediaries. “Hydropower IPOs have been stalled for the past 22 months. Complaints against SEBON are increasing. As the president, I have to listen to everyone,” said IPPAN President Ganesh Karki. “We will meet with the SEBON chairman and discuss the matter. We will request the approval for IPO issuance.”

Due to the halt in the public issuance of IPOs worth Rs. 20 billion from 42 energy companies that had applied, the approval for rights shares worth Rs. 4.5 billion from 11 companies has also been put on hold.

Due to the lack of approval for public issuance, the construction work of those hydropower projects has come to a halt. On the other hand, according to the existing legal provisions, hydropower companies are required to issue IPOs for the general public, but this mandatory provision has not been implemented, according to IPPAN.

IPPAN Vice President Uttam Lama stated that the issue of halting IPOs for the past 20 to 22 months is a much bigger concern than the issue of commissions. He emphasized that halting the IPOs for such a long period is a greater crime than demanding commissions. “It is heard that there have been discussions about commissions. Taking or giving commissions is wrong, but the fact remains that we haven’t been allowed to bring IPOs for the past 20 months. They have been halted. As a result, projects are starting to be stalled,” he said. “Either we should be told that bringing IPOs is not allowed, and that it is wrong, or they should not be kept on hold. Keeping them on hold is a serious crime.” He expressed his concern that halting IPOs has delayed the development of a sector that holds great potential for the country.

What has been stated in the direction of the Public Accounts Committee?

In the 19th meeting of the Public Accounts Committee held on December 28, 2023, it was directed that for issuing an IPO, the real net worth should be more than 90. Referring to this directive, the Nepal Securities Board has halted the approval of IPOs. Prior to this, the approval was also withheld due to the absence of an appointed chairman at the board.

Since the term “real net worth” is not used in this sector, the Securities Board has not taken any further action, stating that IPOs can only be issued once the government defines this term. As a result, financial management issues have arisen in the ongoing projects in the private sector. On the other hand, local stakeholders have started to obstruct the construction of projects, citing that they have not been provided shares.

Similarly, according to Decision No. 6 of the Public Accounts Committee, the provision that one-third of the shares of a hydropower project cannot be sold even after the completion of a three-year lock-in period, once the basic shareholders have paid off the debt taken for the project’s construction, has started to negatively impact the equity investment environment.

Currently, in one project alone, more than 10,000 founder investors have started investing through crowd financing. Due to the share investments from the general public and promoters, significant support has been provided in capital mobilization in the energy sector, which is a major area for large investments.

If the provision that prevents the sale of shares even after the lock-in period ends remains in place, the promoters of one project will be less likely to invest in other projects, thereby reducing the chances of building large-scale projects in the future. This would also pose a serious obstacle to the implementation of the “Energy Development Roadmap and Action Plan, 2024,” which targets the production of 28,500 MW of electricity over the next 10 years. As a result, in order to meet the government’s goal, IPPAN has already requested the Prime Minister to reconsider this decision and create an environment for issuing IPOs based on the existing legal framework, facilitating investment in hydropower projects through crowd financing.

Source: Nepal Purbadhar

[ 8 May, 2025 / nepalenergyforum.com ]   
 
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