A recent move by Om Megashree Pharmaceuticals Limited has triggered intense scrutiny, exposing what market experts are calling a dangerous game of "backdoor listing" in Nepal's capital market.
The controversy erupted following the announcement of Om Megashree’s upcoming Special General Meeting (SGM). The primary agenda of the meeting is the acquisition of Royal Pharmaceuticals Pvt. Ltd., an unlisted private company. While mergers and acquisitions (M&A) are common practice in the secondary market, a listed public company attempting to absorb a private entity has sparked fierce dissatisfaction and raised serious legal and ethical questions.
Investors Raise Serious Objections
Prominent stock market analysts and capital market advocates have voiced strong objections, taking to social media to draw the immediate attention of the Securities Board of Nepal (SEBON).
Stock Market Analyst, Keshav Koirala labeled the move "the new and biggest fraud in the stock market." He argued that allowing a listed public company to acquire a private limited entity essentially grants the private firm direct entry into the secondary market. This bypasses the traditional Initial Public Offering (IPO) process, public limited company registration, and stringent regulatory oversight.
Similarly, Capital Market Policy Advocate, Ambika Prasad Poudel publicly questioned SEBON regarding the legitimacy of the move, asking for feedback in "civilized language"—a subtle nod to the deeply problematic nature of the proposal. The involvement of high-profile figures, including tags to political leaders like Swarnim Wagle, underscores that this is being viewed as a matter of policy-level corruption.
The Risks of 'Backdoor Listing'
If the leadership of SEBON approves this acquisition, it could set a highly damaging precedent for Nepal's financial ecosystem. Experts warn of two major risks:
- The Collapse of Regulatory Oversight
Financially weak private companies could completely bypass SEBON’s strict IPO ratings, financial health checks, and premium approval processes. Instead, they could simply buy out or merge with small, weak listed companies to gain immediate access to the secondary market.
- Increased Public Exploitation
Financially distressed companies across various sectors—such as hydropower or manufacturing—could use this tactic as a weapon to artificially pump up stock prices, trapping retail investors in highly volatile or worthless shares.
The public outcry led by market leaders has put the regulatory body in the spotlight. SEBON now faces a critical litmus test: will it act as a guardian of the law and close this backdoor loophole, or will it remain silent and allow institutional exploitation to take root? The regulator's decision on this matter will undoubtedly define its credibility and honesty moving forward.
