SEBON’s Proposed IPO Rules Face Objections From IPPAN: Separate Framework Sought for Hydropower

SEBON’s Proposed IPO Eligibility Rules Draw Concerns From IPPAN

Nepal’s proposed new framework for Initial Public Offerings (IPOs) has triggered concerns from the Independent Power Producers’ Association, Nepal (IPPAN), particularly regarding its potential impact on hydropower companies.

IPPAN has submitted recommendations to the Securities Board of Nepal (SEBON), requesting that the proposed draft on general eligibility requirements for public issuance be reviewed to reflect the distinct business model, capital requirements and development cycle of hydropower projects.

According to the organization, applying identical IPO eligibility standards to banks, insurance companies, hydropower developers, pharmaceutical companies and manufacturing businesses may not adequately reflect differences in their business structures and capital requirements. IPPAN has therefore proposed a separate section and IPO checklist for hydropower companies.

For investors following the Nepal stock market, NEPSE and upcoming IPOs, these proposed changes could become an important regulatory development to monitor.

Why Hydropower Companies Want Different IPO Rules

Hydropower projects generally require substantial capital during the construction phase, well before they begin commercial operations.

IPPAN argues that requiring a company to demonstrate continuous business operations before issuing ordinary shares could create difficulties for hydropower developers because projects may need to raise capital during construction.

Instead, IPPAN has suggested that hydropower companies should be allowed to apply for an IPO once a project reaches approximately 65% physical progress.

This proposal reflects a broader question in Nepal's capital market: Should IPO eligibility requirements be identical across all industries, or should sector-specific characteristics be considered?

Proposed Net Worth Requirement Draws Strong Objection

One of the major issues raised by IPPAN concerns the proposed net worth requirement.

The draft reportedly proposes that an organized institution's per-share net worth should not be below its face value. IPPAN has asked that this requirement be removed for productive industries, particularly hydropower companies.

IPPAN has claimed that if the proposed net worth condition remains unchanged, a significant portion of hydropower projects could face difficulties in issuing shares to the general public. The organization has estimated that around 60% of hydropower projects could potentially be affected under the proposed provision. This is an IPPAN estimate, not an independently verified figure presented by SEBON in the cited report.

For stock market investors, net worth is an important fundamental-analysis indicator because it can affect how investors assess a company's balance sheet, book value and financial strength.

IPPAN Questions Proposed Debt-to-Capital Requirements

IPPAN has also objected to a proposed provision under which SEBON could establish financial indicators based on sectoral characteristics, including debt-to-capital ratios and interest-payment capacity.

The association has requested that the debt-to-capital ratio provision be removed.

Hydropower projects frequently require significant project financing, meaning their financial structures can differ substantially from those of mature companies in other sectors.

From an investment-analysis perspective, investors should therefore examine factors such as:

• Debt-to-equity ratio
• Interest coverage
• Project completion status
• Generation capacity
• Power purchase agreement
• Construction progress
• Revenue-generation timeline
• Cost overruns
• Interest expenses
• Book value and net worth

Objection to Fit-and-Proper Test for Founding Shareholders

Another concern involves the proposed fit-and-proper assessment of founding shareholders, directors and chief executive officers.

IPPAN has argued that founding shareholders should not be included in the proposed requirement.

The association's position is that an issue involving an individual founding shareholder should not automatically prevent an entire company from accessing the IPO market and potentially affect thousands of other investors.

IPPAN has also requested greater clarity regarding provisions related to blacklisting and the period required after removal from a blacklist.

IPPAN Wants a Time-Bound IPO Approval Process

IPPAN has also requested clear deadlines for SEBON's IPO review and approval process.

Under its recommendation, the initial review should be completed within:

• 15 days from receipt of the application
• 7 days after receiving additional documents requested during the review

For detailed evaluation, IPPAN has suggested completion within 45 days, followed by a mandatory decision within approximately 60 to 90 days.

A clearly defined timeline could provide greater predictability for companies planning capital raising and for investors monitoring the IPO pipeline.

Environmental Risk Assessment Also Questioned

IPPAN has objected to including environmental risk as a factor in the evaluation of hydropower IPO applications under the proposed framework.

Environmental and project-development risks can be significant for infrastructure projects. The debate therefore involves how regulatory authorities should incorporate such risks while also allowing viable projects to access capital markets.

The final treatment of this issue will depend on the regulatory process and SEBON's final decision.

What About Hydropower Companies Already in the IPO Pipeline?

IPPAN has also requested transitional arrangements for hydropower companies that have already submitted IPO applications.

The association has proposed that companies already in the pipeline under the existing Public Issue General Eligibility Guidelines, 2074 should continue to be evaluated under the previous framework rather than being adversely affected by new requirements.

It has additionally called for an adequate transition period after implementation of any new directive.

What Could the Proposed IPO Rules Mean for NEPSE Investors?

The proposed framework is important for investors because changes to IPO eligibility can influence the timing and structure of new share issues in Nepal.

For NEPSE investors and IPO applicants, key areas to monitor include:

1. Hydropower IPO eligibility
2. Minimum net worth requirements
3. Project completion requirements
4. Debt and capital structure rules
5. Fit-and-proper requirements
6. Environmental risk assessment
7. IPO approval timelines
8. Treatment of companies already in the IPO pipeline

However, these proposals should not be interpreted as final rules until the relevant regulatory process is completed.

IPO Investors Should Look Beyond IPO Hype

An IPO application or approval does not by itself determine whether a company represents a suitable investment for every investor.

Investors should study the company's:

• Financial statements
• Earnings potential
• Net worth
• Debt obligations
• Project status
• Business model
• Cash-flow outlook
• Promoter share structure
• Lock-in provisions
• Dividend potential
• Sector risks
• Valuation

This is particularly important in the hydropower sector, where companies can have very different project-development stages and financial structures.

For investors wanting to develop these skills, learning fundamental analysis, technical analysis, portfolio management and NEPSE market analysis can provide a stronger foundation for independent investment decisions.

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Frequently Asked Questions — SEBON IPO Rules and Hydropower

1. What is SEBON's proposed new IPO framework?

SEBON has proposed a draft framework covering general eligibility requirements for public issuance of securities. The proposed provisions have drawn recommendations from IPPAN regarding their application to hydropower companies.

2. Why does IPPAN want separate IPO rules for hydropower companies?

IPPAN argues that hydropower projects have different capital requirements, development timelines and business structures compared with sectors such as banking, insurance and manufacturing. It has therefore requested a separate hydropower section and IPO checklist.

3. What IPO eligibility threshold has IPPAN proposed for hydropower projects?

IPPAN has suggested that hydropower projects should be able to apply for IPOs after reaching approximately 65% physical progress.

4. What is the proposed net worth requirement?

The reported draft proposes that an organized institution's per-share net worth should not be below its face value. IPPAN has asked for this condition to be removed for productive industries, particularly hydropower.

5. How could the proposed IPO rules affect hydropower companies?

According to IPPAN's submission, certain proposed requirements could make it more difficult for some hydropower projects to access the public capital market. The final impact will depend on SEBON's eventual rules.

6. What approval timeline has IPPAN proposed?

IPPAN has suggested a 15-day initial review, seven days for review after additional documents are received, detailed evaluation within 45 days and a mandatory decision within 60–90 days.

7. What should investors check before investing in hydropower stocks?

Investors can examine project progress, financial statements, debt levels, interest expenses, earnings prospects, net worth, valuation, cash flow, generation capacity and other company-specific risks.

8. Are the proposed SEBON IPO rules already final?

The reported provisions are part of a proposed draft and recommendations have been submitted for consideration. Investors should distinguish between a draft proposal, stakeholder recommendation and final regulatory rule.

Final Takeaway

The debate surrounding SEBON's proposed IPO eligibility framework highlights the challenge of designing capital-market rules that protect investors while recognizing differences between industries.

IPPAN is seeking sector-specific IPO requirements for hydropower companies, including changes to proposed net worth rules, project-operation requirements, debt-related provisions, fit-and-proper assessments and IPO approval timelines.

For Nepal's stock market investors, the next important development will be how SEBON evaluates stakeholder feedback and what provisions ultimately appear in the final framework.

Disclaimer: This article is an informational rewrite based on a September 22, 2026 report by Bizmandu and the recommendations attributed to IPPAN. It is not investment advice or a recommendation to buy or sell any security. Investors should conduct their own research and consider professional advice where appropriate.