Three dozen broker companies submit capital-raising action plans

KATHMANDU, FEBRUARY 24: Stock broker companies have submitted their action plans to the Nepal Securities Board (SEBON) to meet the required paid-up capital set by the board. Of the 37 broker companies that submitted their plans, 24 have opted for mergers, bonus shares, and rights shares as their strategies for capital expansion.

According to SEBON, Kumari Securities, Arun Securities, Market Securities, JF Securities, Ashutosh Brokerage, Malla & Malla Stock Broker, Thrive Securities, and ABC Securities have chosen all three options—merger, bonus shares, and rights shares—to raise the required capital. Similarly, Silpa, Midas, Siprabi, Sweta, Asian, Shree Krishna, Kohinoor, Secured, Sumeru, Creative, Investment, Seva, Shrihari, Aryatara, and Divya Securities have also submitted action plans based on these options.

Among the companies that submitted their action plans, Agarwal Securities has already met the capital requirement. Meanwhile, 12 other companies have submitted plans to meet the requirement by the end of the current fiscal year. These companies include Openal Securities, Pragyan, Nepal Stock, Primo, Nepal Investment & Securities, Trishul Securities, Lynch, South Asia, NIB, Crystal, Sundhara, and Bhrikuti Securities, though they have not specified their preferred method for raising capital.

SEBON’s capital requirement guidelines

In Bhadra of 2079 (mid-August to mid-September, 2022) SEBON directed stock brokerage firms to increase their capital by Ashadh, 2081 ( mid-June to mid-July 2025). This directive has the following provisions:

• Companies with limited operations must increase their paid-up capital by NPR 200 million (20 crores) from the previous NPR 20 million (2 crores).
• Companies engaged in full-fledged brokerage services must raise their capital to NPR 600 million (60 crores), up from the previous NPR 50 million (5 crores).
• Securities traders are required to maintain a paid-up capital of NPR 1.5 billion (1.5 billion rupees).

Brokers have expressed concerns over SEBON’s decision to increase capital requirements tenfold in one step, stating that the directive is impractical.

Previously, in 2017, SEBON amended the Securities Dealers, Traders, and Market Makers Regulations, 2007, increasing the paid-up capital requirement for brokerage firms from NPR 2 million (20 lakhs) to NPR 20 million (2 crores). In 2022, SEBON further raised this requirement to NPR 200 million (20 crores).

New broker license holders must maintain a paid-up capital between NPR 200 million (20 crores) and NPR 1.5 billion (1.5 billion), depending on their service level, while existing brokers must comply with the new capital requirement within three years i.e by the coming Ashadh ( mid-June to mid-July 2025).

With the deadline approaching, 42 newly licensed brokerage firms have already met the capital requirement. Among the 50 existing brokerage firms, 12 have complied, while others face challenges. SEBON has provided mergers as an alternative for firms struggling to meet capital requirements.

Merger directives and future plans

To facilitate mergers among brokerage firms, SEBON is preparing to issue a Merger Directive, expected to be released next week, according to SEBON spokesperson Niranjay Ghimire. He stated, "We are introducing the directive to make the merger process easier for brokerage firms. It will outline the necessary procedures for mergers."

This directive aims to streamline the process and provide a structured approach for firms considering mergers as a means of meeting capital requirements.