KATHMANDU, Nov 23: In a major breakthrough, the government has paved the way for Non-Resident Nepalis to invest in the country’s secondary market, but slapped a number of conditions.
The Securities Board of Nepal (SEBON) amended its Securities Issuance and Distribution Directive 2024, removing some of the longstanding legal hurdles.
According to the SEBON, the 8th amendment comes up with the provision allowing the Non-Resident Nepalis (NRNs) to invest in the stock market by establishing joint investment companies which can issue a minimum of 10 percent and a maximum of 49 percent of their shares to NRNs.
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The joint investment companies must be registered at the SEBON prior to the issuance of their Initial Public Offerings (IPOs). With an approval from the regulator, the IPOs can be floated only for NRNs for a minimum of four days and a maximum of 15 days.
The sector’s regulator however has put restrictions stating that these IPOs must involve at least 1,000 units and can only be traded among NRNs. Likewise, the subscribers cannot trade the IPOs for one year. The rights shares can also be transferred only between and among the NRNs.
Nabaraj Adhikari, executive director of the SEBON, said the amendments aim to attract NRNs to the country’s capital market. According to him, the initiative could help mobilize more capital inside the country.
The NRNs have long been demanding the authorities to permit the Nepalis residing abroad to invest in the country’s secondary market. Through its annual general meeting held last month in Kathmandu, the Non-Resident Nepali Association (NRNA) expressed its commitment to establish and implement a development fund of Rs 10 billion that will enable Non-Resident Nepalis (NRNs) to invest in Nepal through primary shares. The NRNA fund will aim for investments in the infrastructure sector.
The government has long been publicly committing to welcoming NRN investments in hydropower and other real sector companies listed in the stock market. Nepal has long intended to mobilize the capital, technology and experience of the Nepali Diaspora for national development. Last year, the SEBON formed a four-member study committee led by its board member Sujan Kumar Kafle targeting to clear any technical and legal hurdles to facilitate NRN investment in Nepal’s stock exchange market.
Stock market analysts have criticized government’s apathy towards allowing NRNs to inject external capital investment in the securities, which is a widespread practice in many countries. As of now, only Nepalis residing inside the country can invest in the country’s primary and secondary markets.
