Beginners' Guide to Share Market and Buying IPOs

Beginner’s Guide to Share Market and Buying IPOs in Nepal’s Stock Market

An IPO (Initial Public Offering) is when a privately-owned company becomes publicly traded by offering its shares to the general public for the first time. It allows the company to raise capital from investors in exchange for ownership (equity). Here's a breakdown tailored to Nepal's context:

Key Features of an IPO

1. First-Time Public Listing: A company transitions from private to public ownership.
2. Capital Raising: Funds raised are used for expansion, debt repayment, or other corporate purposes.
3. Share Allotment: Shares are distributed to applicants, often via a lottery system (due to high demand in Nepal)

IPO Process in Nepal

1. Approval from SEBON:
• The Securities Board of Nepal (SEBON) regulates and approves IPOs.
2. Prospectus Publication:
• The company releases details about its business, financials, and IPO terms (price, number of shares, etc.).
3. Application via CASBA:
• Investors apply through the Centralized Application Supported by Blocked Amount (CASBA) system, where funds are temporarily blocked in their bank accounts.
4. Allotment:
• If oversubscribed (common in Nepal), shares are allotted via a lottery.
5. Listing on NEPSE:
• Shares are listed on the Nepal Stock Exchange (NEPSE) 30–45 days after the IPO closes.

Why Companies Launch IPOs in Nepal

• Raise funds for growth (e.g., hydropower projects, bank expansions).
• Enhance credibility and visibility.
• Provide liquidity to existing shareholders.

Why Invest in IPOs in Nepal?

1. Potential Gains:
• IPOs often list at a premium (e.g., NIC Asia Bank, Api Power saw strong post-listing gains).
2. Access to New Companies:
• Invest early in growing sectors like hydropower, banking, or microfinance.
3. Transparency:
• Regulated by SEBON and NEPSE, ensuring compliance.

The Risks of IPOs in Nepal

1. Oversubscription: High demand often leads to low allotment rates (e.g., 1–5% for popular IPOs).
2. Post-Listing Volatility: Prices may drop if market sentiment shifts.
3. Limited Historical Data: New companies may lack a track record.

How to Apply for an IPO in Nepal

1. Open a DMAT Account: Required to hold shares electronically.
2. Link CASBA with Your Bank: For blocking funds during applications.
3. 
   Apply via Meroshare: Use the online platform meroshare.cdsc.com.np.
4. Submit Application: Specify the number of kittas (units) you want.

(Example: A hydropower company issues 10 lakh shares at Rs. 100 per kitta. Investors apply for 100 kittas each, but only 1% are allotted due to oversubscription.)

Tips for IPO Investors in Nepal

• Research the company’s financials (EPS, P/E ratio) and sector trends.
• Avoid overhyped IPOs; focus on fundamentals.
• Use Merolagani or Sharesansar to track IPO news and allotment results.

 In Nepal, IPOs are a gateway to investing in the country’s economic growth but require careful analysis. Always verify details on SEBON’s website or through licensed brokers! 

Why Invest in IPOs?

Initial Public Offerings (IPOs) allow you to buy shares of a company when it goes public for the first time. In Nepal, IPOs are often oversubscribed due to high demand, but they can offer significant returns if chosen wisely.

Step 1: Understand the Basics

What You Need

1. DMAT Account: Dematerialized account to hold shares electronically.
2. CASBA Account: Centralized Application Supported by Blocked Amount (CASBA) to apply for IPOs.
3. Bank Account: Linked to CASBA for blocking funds during IPO applications.

 Step 2: Open a DMAT Account

Documents Required:

• Citizenship certificate or passport (for foreigners).
• Recent passport-sized photos.
• Bank account details (for CASBA linkage).

Process:

1.    Choose a Depository Participant (DP):
·       Licensed banks or financial institutions (e.g., Global IME Bank, Nabil Bank, Prabhu Capital).
2.    Submit Application Form:
·       Fill out the DMAT account form at the DP’s office or online 

(if available).
3.    Verification:

• Provide original documents for verification.

                                4. Account Activation:

                                        Receive your DMAT account number in 1–3 working days.

Step 3: Link CASBA with Your Bank Account

1. Visit Your Bank:
• Today, aLL banks in Nepal (e.g., NIC Asia, Himalayan Bank, NIMB, etc.) offer CASBA services.
2. Request CASBA Activation:
• Link your DMAT account and bank account for IPO applications.
3. Confirm Blocked Amount Facility:
• Ensure funds can be temporarily blocked (not debited) during IPO applications.

(Image idea: CASBA activation page on a bank’s online portal.)

Step 4: Apply for an IPO

Where to Find IPO Information

• NEPSE Website: www.nepalstock.com.np
• Merolagani: www.merolagani.com
• Newspapers: Notices in the daily newspapers like, The Himalayan Times or Annapurna Post.

How to Apply

1. Check IPO Details:
• Issue price, number of shares, and application deadline.
2. Apply via CASBA:
• Online: Use your bank’s mobile app (e.g., Global IME App, NIC Asia ASBA).
• Offline: Fill out a physical form at your bank.
3. Block Funds:
• The application amount is blocked (not deducted) until shares are allotted.
• Example: For 100 shares at Rs. 100 each, block Rs. 10,000.

(Image idea: Mobile banking app screenshot showing IPO application steps.)

Step 5: Allotment and Listing

1. Lottery System:
• If oversubscribed, shares are allotted via lottery.
• Unblocked funds are released if not selected.
2. 
   
   
3. Listing on NEPSE:
• Shares are listed 30–45 days after the IPO closes.
• Track prices on Merolagani or NEPSE Alpha.

(Image idea: NEPSE trading floor or a stock listing announcement.)

Key Tips for IPO Beginners

1. Research the Company:
• Check its financials, business model, and growth prospects.
2. Avoid Overhyped IPOs:
• High demand ≠ good returns. Analyze fundamentals.
3. Diversify:
• Don’t invest all funds in one IPO.
4. Use Mero Share:
• Nepal’s online platform for IPO applications (requires DMAT).

Common Mistakes to Avoid

❌ Missing Deadlines: IPOs close quickly; apply early.

❌ Ignoring CASBA Limits: Banks cap applications (e.g., Rs. 500,000 per person).

❌ Panic Selling: Hold quality stocks post-listing for long-term gains.

Final Checklist

✅ Open DMAT and CASBA accounts.
✅ Research upcoming IPOs.
✅ Apply via bank/Mero Share before the deadline.
✅ Monitor allotment results and listing dates.

(Image idea: Infographic summarizing IPO steps.)

Need Help?

• Contact Depository Participants of your account like:

ü  NIBL Ace Capital: www.niblcapital.com

• NEPSE Helpline: +977-01-4266091

Happy Investing! 

(Always consult a financial advisor before making decisions.)

(Image idea: A celebratory graphic of NEPSE’s index rising.)

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