In today’s article, we are going to talk about the 6 Important Things You Should Know Before Entering in Nepal Share Market.

The company’s capital or ownership is divided into several units and sold to investors. Thus the document of the divided unit of the capital of the company is called a share. Shares are issued to raise capital for the company. A share is an invisible unit of capital in which an agreement is made between the company and the shareholder.

By investing in shares, shareholders receive a dividend each year based on the company’s financial performance or profits. There is a profit or loss from the business of any company. The share of the investment is the share of both the loss or the profit in proportion to the investment made.

When registering a company, those who register a company have to get the approval of the company’s registered capital structure and authorized capital of the company. Authorized capital is the approved budget of the company.

For example, a bank with a capital of Rs 1 billion or a company operating a hydropower project is the authorized capital. But out of that Rs 1 billion, if the start-ups of the company are allowed to invest Rs 300 million, seek loans from Rs 300 million banks, and raise Rs 400 million from the general public, then the ratio of raising that amount is the structure of capital. After approving the capital structure in this way, the first people to start a company put a share equal to the amount they have pledged, which is called founder share or preference share.

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For some reason, the company could not run and in case of dissolution, after the loan amount, the payment of this share is returned first. It has a fixed bonus. The Board of Directors is formed with the majority of the shareholders in the Board of Directors.

6 Important Things You Should Know Before Entering in Nepal Share Market

These are the 6 important things that you should know before entering in Nepal Share Market.

Ordinary shares

Once the founders have acquired the founder’s shares, an investment environment is created to run the company. Only then is the loan sought and ordinary shares issued. Ordinary shares are shares raised by the general public. Generally, the price of one share is Rs. 100 in Nepal Share Market. Generally, the general public is given the opportunity to invest in more than 50 shares. The shares that take all the profit and loss in the end when the company is dissolved are ordinary shares.

Companies have to register with the Nepal Securities Board before issuing shares. Similarly, when issuing shares worth at least Rs 30 million to the public, a rating should be obtained from ICRA Nepal. Investors can also find out which company’s shares are coming from the websites of these two organizations.

How to buy shares?

One week before the issuance of IPO, the concerned companies issue invitations. This invitation letter gives information about how many shares the company is issuing and from what date. The invitation letter mentions the current status and future plans of the company apart from how much and from where applications can be made for the company’s shares.

Those who can study the invitation letter well can get a lot of information about the company from there. Since such an invitation has been approved by the Securities and Exchange Board, investors can rely on credibility.

Forms for investing in shares are available from the share sale manager or designated collection centre mentioned in the invitation letter. The form should also fill in the requested information about yourself by mentioning how many shares the investor wants to take. You have to sign the share form. Since you have to get the signature when you withdraw the cash later, you have to sign it clearly and in person.

Src: Acco Tutor

Bank account mandatory

There is a provision that the bank account of the person filling the form should be mandatory. In case of less than the required number of shares or in case of non-receipt of shares, the sales manager issues an account payable check (ie the amount goes to the account) so that the amount can be deposited in the same account.

When you go to fill out the form, you must submit two copies of your passport size photo and a copy of your citizenship. As the original citizenship certificate has to be shown at the collection centre, it should be carried along. When asking for shares in excess of the prescribed limit, the source of income has to be mentioned and the payment has to be made through an account payable check.

The distribution of applied shares takes 40 to 70 days depending on the issued shares. Once the shares are distributed, the investor is sure of how many shares he has received. Certificate of the received shares and refund of the shares not received even after request can be obtained from the collection centre or sales manager.

As they do not get the required number of shares, they also get interested in that amount. However, such interest is only 2 per cent. Some banks and financial institutions have also launched shareholder accounts targeting those who invest in their own shares. If the company has to return the amount to those who have fewer shares than the demand, they will keep the amount in the account and also deposit the future cash dividend. The interest rate after depositing money in this account is a bit higher.

Trading in Nepse

The company lists its shares on the Nepal Stock Exchange (NEPSE) within 30 days of the distribution of shares. Investors will then be able to trade shares (other than those issued by a company such as Hydropower to locals or the same group). For the first transaction of any company, Nepse sets the amount up to 3 times the net worth of the company. After that, the price is determined according to the demand and supply in the market.

Nepal Stock Exchange:

The Nepal Stock Exchange is the only stock exchange in Nepal. It is located in Singha Durbar Plaza, Kathmandu, Nepal. As of May 2022, the equity market capitalization of the companies listed on NEPSE was approximately रू334,357 crore.

Conclusion:

These are the 6 things that you should know before you enter in Nepal Share Market. If You find this information helpful then share with your friends, Comment below if you want to add something. Follow Us on Telegram.

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