Understanding IPO and Public Share Issues in Nepal

An Initial Public Offering (IPO) is the process through which a company offers its shares to the general public for the very first time. In Nepal, IPOs are regulated by the Securities Board of Nepal (SEBON) and traded on the Nepal Stock Exchange (NEPSE). For many Nepali investors, applying for an IPO is the most accessible entry point into the share market, since shares are offered at face value (typically Rs. 100 per unit) rather than the often higher market price.

Types of Public Issues

Not every share issue is an IPO. Nepal's capital market features several types of public offerings. An IPO is issued when a company sells shares to the public for the first time. A Further Public Offering (FPO) is when an already-listed company issues additional shares to raise more capital. Right Shares are offered exclusively to existing shareholders, usually at a discounted price proportional to their current holdings. Bonus Shares are free shares distributed to existing shareholders from the company's retained earnings, requiring no additional investment.

The IPO Process in Nepal

The journey of an IPO begins when a company applies to SEBON for approval to issue shares publicly. Once SEBON grants approval, the company appoints an Issue Manager — firms like NMB Capital, NIBL Ace Capital, or Prabhu Capital — to handle the distribution. The issue opens for public application, typically for 3 to 5 days. During this window, investors submit their applications through the MeroShare platform using the ASBA (Application Supported by Blocked Amount) method, which blocks the application amount in their bank account rather than deducting it upfront.

How to Apply and What You Need

To apply for any IPO in Nepal, you need a DMAT (Dematerialized) account opened through a Depository Participant (DP), a MeroShare account linked to your DMAT, a CRN (Customer Registration Number) from your bank, and a bank account enabled for ASBA. The minimum application is 10 kitta (units) of shares, though some companies may set a different minimum. Your bank account must have sufficient balance to cover the blocked amount at the time of application.

Allotment and Listing

Most IPOs in Nepal are heavily oversubscribed, meaning more people apply than there are shares available. In such cases, CDSC (CDS and Clearing Limited) conducts a computerized lottery to determine who receives shares. Each successful applicant is allotted a minimum of 10 kitta. After allotment, the shares are credited directly to your DMAT account (identified by your BOID — Beneficiary Owner Identification Number). If you are not allotted, the blocked amount is released back to your bank account within a few days. The company then lists on NEPSE, and you can trade your shares on the secondary market.