The Securities Board of Nepal (SEBON) has issued detailed conditions for investment companies seeking to raise capital through Initial Public Offerings (IPOs). These rules, published on Ashadh 8, 2082 B.S. (June 22, 2025), aim to ensure transparency, regulatory compliance, and sectoral alignment for such companies.
Background
Investment companies in Nepal are categorized under the “service industries” as per the Industrial Enterprises Act, 2076 (2019). The Ministry of Industry, Commerce, and Supplies first outlined conditions for their establishment in the Nepal Gazette (March 2, 2023), which apply to both domestic and foreign-invested firms.
SEBON’s new notice complements this by specifically addressing the requirements for making IPOs.
Key Regulatory Highlights
Permitted Investment Sectors
Investment companies may only invest in the following sectors:
- Energy
- Transportation
- Communication
- Agriculture
- Tourism
- Manufacturing and processing
- Information technology
- Mineral extraction
These sectors must be clearly mentioned in the memorandum of association at the time of incorporation.
Modes of Investment
- Only allowed to invest in promoter shares (no secondary market participation).
- May invest in state-backed institutions as promoters.
- Can participate as Qualified Institutional Investors (QII) in IPOs using the book-building method with SEBON’s prior approval.
Prohibited Activities
Investment companies are not allowed to:
- Invest in shares outside of promoter shares.
- Invest using debt instruments (loans, bonds, debentures).
- Conduct banking or cooperative business.
- Invest in shell companies, shell banks, or engage in real estate, securities brokerage, or market-making.
- Borrow from domestic financial institutions or use foreign bank guarantees.
Capital Requirements
- Nepal Gazette: NPR 1 billion required to register as an investment company.
- SEBON: Minimum paid-up capital for IPO eligibility is NPR 500 million.
To satisfy both, companies are advised to meet NPR 1 billion in paid-up capital.
IPO Eligibility Criteria
To issue an IPO, an investment company must:
- Have operated for at least 3 years.
- Be profitable in the last 2 fiscal years.
- Have net worth per share exceeding the face value.
- Be exclusively focused on investing in allowed sectors.
- Hold a credit rating at least one grade above minimum.
- Be either promoted by the Government of Nepal or meet the investment company definition.
