For years, Nepal’s IPO market has been a fast-track to easy profits. Investors rushed to buy shares at face value, confident that prices would skyrocket in the secondary market. While many made quick gains, the foundation of this boom was shaky—financially weak companies were slipping through regulatory loopholes, securing IPO approvals despite low net worth and poor earnings.

As a result, share prices inflated artificially, creating a bubble that left retail investors facing massive losses when reality caught up.

Now, pressure is mounting on the Securities Board of Nepal (SEBON) to introduce stricter IPO regulations to prevent history from repeating itself. However, despite ongoing discussions and growing concerns, no official rule has been implemented yet.

This delay has raised critical questions:

• Will SEBON take decisive action to restore market integrity?
• Or will continued inaction allow market manipulation to thrive?

At the center of this controversy is former SEBON chairman Ramesh Hamal, now under investigation for approving multiple IPOs of financially weak companies. Critics argue that his tenure turned Nepal’s stock market into a "casino", where speculation replaced genuine investment.

What went wrong, and how will potential policy changes impact investors and businesses?

SEBON’s Proposed Rule: What Might Change?

There has been significant discussion within SEBON and Parliament’s Public Accounts Committee (PAC) about a new rule:

• Companies would need to issue at least 20 percent of their shares to the public instead of the current 10 percent requirement.

While SEBON has not officially enforced this rule yet, if implemented, it would require many companies to revise their IPO applications.

Why Is SEBON Considering This Rule?

During Ramesh Hamal’s tenure, SEBON approved IPOs for companies with net worths below Rs 90 per share, allowing financially weak businesses to enter the stock market. Many of these companies:

• Issued a small number of shares to create artificial demand. This led to huge oversubscriptions, pushing prices up in the secondary market.
• Had low profitability but high stock valuations. Many investors assumed IPO approval meant financial stability, only to later see prices crash.
• Were involved in market manipulation. Some companies inflated share prices under the guise of being "growth stocks", but in reality, they lacked long-term earning potential.

These issues damaged investor confidence, and SEBON has been under pressure to act. However, despite ongoing discussions, the rule has not been made official.

Companies That Could Be Affected If the Rule Is Enforced

Currently, more than 80 companies have applied for IPO approval with SEBON. If the 20 percent rule is implemented, many of them would have to increase their public share offering or risk rejection.

Major Sectors in the IPO Pipeline

• Hydropower: 42 companies
• Hotels and Tourism: 7 companies
• Real Estate: Multiple firms
• Manufacturing: 15 companies
• Investment Companies: 3 firms
• Microfinance and Microinsurance: 4 companies

The "Casino Market" Problem and Government Investigations

Public Accounts Committee’s (PAC) Orders to SEBON

Nepal’s Public Accounts Committee (PAC) has ordered SEBON to:

1. Stop approving IPOs for companies with net worths below Rs 90 per share.
2. Implement a stricter IPO approval process to prevent future market manipulation.

However, despite these recommendations, SEBON has not yet finalized or implemented the new IPO rules.

CIAA and Money Laundering Investigation Against Ramesh Hamal

The Commission for the Investigation of Abuse of Authority (CIAA) and the Department of Money Laundering Investigation are investigating Ramesh Hamal and other former SEBON officials for:

• Allegations of abuse of power in approving IPOs for weak companies.
• Potential financial misconduct related to market manipulation.

Sources from the CIAA have confirmed that the final investigation is ongoing, but no formal charges have been filed yet.

Potential Outcomes of the Investigation

• If found guilty, former SEBON officials could face legal action.
• Stronger IPO regulations could be implemented as a result.
• SEBON’s credibility and Nepal’s stock market stability could be restored if accountability is ensured.

While the investigation continues, SEBON remains under pressure to implement the proposed IPO reforms.

What Does This Mean for Investors?

For investors, SEBON’s possible IPO reforms bring both risks and opportunities.

Negative Impact:

• Fewer IPOs available – If the 20 percent rule is enforced, many companies will fail to qualify.
• Harder to make quick profits – In the past, IPOs often led to guaranteed short-term gains, but that may no longer be the case.

Positive Impact:

• Stronger, more transparent stock market – IPOs would be limited to financially stable companies.
• Less market manipulation – SEBON’s stricter policies would help create more realistic stock prices.
• Better investor protection – Small investors would no longer be misled by hyped-up IPOs with weak fundamentals.

Will SEBON’s Proposed Policy Work?

Nepal’s stock market is at a turning point. If SEBON finalizes and enforces these rules properly, it could help:

• Prevent future IPO manipulation.
• Ensure financially weak companies do not exploit investors.
• Bring more trust and stability to Nepal’s capital markets.

However, if SEBON continues to delay official implementation, market speculation and risky IPOs may continue.

For This to Be Successful, SEBON Must:

• Make the 20 percent rule official without further delay.
• Ensure financially strong companies get IPO approvals.
• Increase transparency in investigations into past IPO approvals.
• Enforce investor protection policies while maintaining market growth.

Conclusion: Is SEBON Strengthening or Slowing the Market?

SEBON’s discussions about IPO reforms reflect growing concerns over past market manipulation, but without officially implementing the rules, problems could continue.

If enforced, these reforms could protect investors and bring stability to Nepal’s stock market. But delays and lack of clear regulations could discourage new businesses from going public, slowing down the market.

What’s Your Opinion?

Do you think SEBON should immediately implement the 20 percent rule, or should it take more time to refine the policy? Share your thoughts.