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🇳🇵 Nepal /Economy & Trade

IPO approval delays stall hydropower projects and disrupt capital mobilisation in Nepal

From Kathmandu Post · (1h ago) English Critical tone

Summarized and contextualized by DistantNews.

TLDR

  • Delays in approving initial public offerings (IPOs) in Nepal are disrupting capital mobilization and hindering project execution, particularly in the hydropower sector.
  • Developers rely on IPO proceeds for project financing, with bank loans often structured around expected equity from public share issuance.
  • A backlog of 98 companies seeking to raise over Rs66 billion in IPOs is attributed to regulatory issues, employee protests, and administrative delays.

The Kathmandu Post reports on a critical bottleneck in Nepal's capital markets: the prolonged delays in approving initial public offerings (IPOs). This issue is not merely an administrative headache; it is actively stifling economic growth, particularly within the vital hydropower sector. Developers, who typically finance projects with a significant portion of bank loans contingent on IPO proceeds, find themselves in a precarious position. The current backlog at the Securities Board of Nepal (SEBON) means that projects are stalled, financial commitments are unmet, and the entire business expansion pipeline is clogged.

projects are facing funding gaps as bank financing plans are tied to expected IPO proceeds.

— Uttam Bhlon LamaVice-president of the Independent Power Producers’ Association, Nepal (IPPAN), explaining the impact of IPO delays on project financing.

This situation is particularly concerning given Nepal's ambition to develop its hydropower potential. The financing structure, which relies on a 70% bank loan and 30% public equity model, is severely undermined when IPO approvals drag on. Underwriting agreements, crucial for share issuance, have short validity periods, leading to repeated renewals and escalating costs for developers. The sheer volume of companies awaiting approval—98 in total, seeking to raise billions of rupees—underscores the scale of the problem.

Failure to issue IPOs within the stipulated time has stalled projects for a prolonged period.

— Uttam Bhlon LamaVice-president of the Independent Power Producers’ Association, Nepal (IPPAN), highlighting the consequences of delayed IPO approvals.

Stakeholders point to a confluence of factors, including past leadership vacuums at SEBON, employee protests, and ongoing procedural delays, even after new leadership was appointed. This administrative paralysis not only impacts large-scale projects but also affects companies across various sectors, including hotels, tourism, manufacturing, and micro-insurance. For Nepal, where mobilizing domestic capital is crucial for development, these IPO approval delays represent a significant self-inflicted wound that needs urgent attention from regulators.

IPO approvals should not be delayed as they directly affect

— Chandra Prasad DhakalOutgoing president of the Federation of Nepalese Chambers of Commerce and Industry, commenting on the importance of timely IPO approvals.
DistantNews Editorial

Originally published by Kathmandu Post. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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