KATHMANDU, Jan 14: The Patan High Court has raised concern over the responsibility and accountability on part of the Securities Board of Nepal (SEBON) while providing listed companies with approval to issue their initial public offerings (IPOs).
Releasing the full text of the verdict on the writ against issuance of Reliance Spinning Mills (RSM), the high court has raised its concern over the regulatory role of the SEBON. The RSM’s attempt to issue its IPOs through book building process invited controversy, while Advocate Hari Bahadur KC filed the writ petition against the company’s issuance.
Issuing its verdict on November 6, the Patan High Court scrapped the writ petition. Prior to this, the SEBON also suspended the IPOs issuance of the RSM on July 10, 2024 after the parliamentary Public Accounts Committee instructed the regulator to suspend the process.
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The high court however has advised the SEBON to look after the interests of the majority of investors and maintain transparency while permitting the listed companies for their IPOs issuance. “As a regulatory body of the sector, the SEBON assumes the main responsibility to ensure transparency and safeguard the interests of investors. It has to prove its responsibility in a practical way,” states the full text of the Patan High Court’s verdict.
The RSM has been blamed for manipulating its financial details while not disclosing outstanding dues of Rs 753.68 million that it owes to Nepal Electricity Authority for using dedicated lines. Likewise, the company was found to have submitted fake financial details to SEBON.
Although the earning per share of the company was just Rs 2, it showed the figure at Rs 54 per share to the sector’s regulator. However, the regulator permitted the company to float its IPOs through the book-building process.
Time and again, the SEBON faces criticism while it approves the listing of IPOs by the companies. “As the SEBON enjoys full sovereignty to regulate the securities market, it holds full authority to decide on statutory hurdles and give approval only after scrutiny of the full financial report of the applicant companies,” the court verdict read.
Meanwhile, the Patan High Court has directed the RSM to revisit its financial prospectus to move forward to issue its IPOs. The court has also asked the company for revaluation of its primary shares along with amendment to its prospectus. Earlier, the RSM was supposed to issue its primary shares at Rs 820.80 per unit.
