Sebon mulls incorporating startups and SMEs in stock exchange market

Published On: August 3, 2023 09:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Aug 3: The Securities Board of Nepal (Sebon) has stepped up efforts to bring the startups under the stock exchange market framework.

The sector’s regulator in this regard has devised a separate regulation on the trading of stocks related to the small and medium enterprises (SMEs), which is said to facilitate the startups in the secondary market. 

Ramesh Kumar Hamal, chairman of the Sebon, said that the board has already endorsed the regulation and is waiting for the final approval from the cabinet.

The board meeting of the Sebon endorsed the regulation on May 18, following which it was sent to the Ministry of Finance. “It is likely to be tabled in the next cabinet meeting,” Hamal said.

The new regulation is expected to promote the businesses of startups as the companies concerned can raise the capital fund from the secondary market. For this purpose, the startups will not be required to maintain any securities.

Provided the regulation is approved by the cabinet in its current form, an individual investor can purchase 250 units of the shares of the startups at the rate of Rs 100 per unit. The investors, however, might have to wait for at least five years to get returns out of their invested amount.  

The startups are expanding their businesses by a notable rate across the country. The government budget also talks about facilitating startups. The government has allocated Rs 1.25 billion for startups promotion for the current fiscal year.

Seven years ago, in the fiscal year 2015-16, the government announced in its budget statement that a fund of Rs 500 million would be established to groom start-ups and innovators. Again in 2019-20, the government announced a cash subsidy of up to Rs 5 million for promising new businesses. In 2020-21, the government created a start-up fund of Rs 500 million to issue loans at 2 percent interest to encourage innovative entrepreneurs hit by the pandemic.

Later on, the government had even announced to give up to Rs 2.5 million in seed capital at a one percent interest rate without collateral for the startups. Despite allocating the funds, lack of proper laws has been hitting the startups to utilize the fund while additionally barring them to generate debt equity.

Likewise, the investment of these companies at the country’s only stock exchange market is nil. If these companies are given space in the stock exchange market, they can generate more funds to expand their investment portfolio, according to Hamal. 

Leave A Comment