This is the first iteration of a series of articles I will be writing about investing in Nepal. This is an article about how to get started with investing in Nepal and Opening a DEMAT account. I wanted to write these articles for people who yawn every time they hear about economic jargon such as liquidity, spread rate e.t.c & Investing, in general. I want to make these ideas simple and easy for people to understand so that everyone can start investing.
A while back, I used to hate the concept of money and all the “evil it has wrought” until I read the book “Money Master the Game – By Tony Robbins.” That book taught me the basic principles of investing, which I use today. But now my understanding of the investment world, mainly derivatives have improved a lot.
Things you will learn from this article are as follows :
- What is DEMAT (De-Materialization)?
- How to Open a DEMA Account
- Mero share & Online Purchase of FPOS and IPOS
- How to Apply for an IPO(Initial Public Offering) using C ASBA
- How to DE-MATERIALIZE your stocks
- Manual vs The Easy Process of De-Materializing your shares
“A journey of a thousand miles begins with a single step “–a famous Chinese proverb
What is DEMAT (De-Materialization)?
To understand the concept of DEMAT (Short for De-Materialization), you should first know what share certificates are. Even now, you can find many people have Physical Certificates of shares they hold. Transferring those from one person to another is a very tedious process that had to be eliminated to make the transfer of stocks easier. That is where DEMAT comes in. It is basically the process of converting the physical certificate into digital. If you want to know how to De-materialize your stocks(certificates), go to the end of the article. There I talk about how to do that.
How to open a DEMAT Account
Currently, you must have a DEMAT account in Nepal in order to buy and sell Stocks. Opening up a DEMAT account is very simple if you already have a bank account. If you don’t have a bank account, then you need to get one. Any bank will work just fine.
In the next step, you need to find a Capital Office. I will advise you to open a DEMAT account in the Capital that is associated with your Bank. For, e.g., If you have a Nepal Investment Bank account, you can create a DEMAT account in NIBL ACE Capital. I strongly advise this because you can ask the Bank to open your DEMAT Account instead of going to a separate capital. Banks are everywhere, but they only have a few Capital Offices.
Note: Capital Offices (Like NIBL ACE Capital) deal only with Securities(Stocks and Bonds). Most banks have their own and It’s OK to have your Bank account in NIBL and your DEMAT Account in Sanima capital. And yes it will cost, money to open your DEMAT Account which is not a lot and will depend on the Capital Office you choose.
Mero share & Online Purchase of FPOS and IPOS
The systematic operation of the stock market in our country is still in its infancy. The online trading system in Nepal is not fully online. But I have to say, I am very happy with the fact that I don’t have to stay in a line for 6 bloody hours to apply for an IPO (An IPO that I don’t even get at the end). So if you, just recently had an epiphany and decided to invest in the stock market then you are a very lucky son of a bitch. (Because I would have killed for the systems that are in place today)
So, getting back to the topic at hand. After you open your DEMAT Account, you want to also apply for a Mero share account. It will cost you an additional 50 Rs. but it sure beats the hell out of sitting in a line for 6 hours. A Mero share account will help you to buy IPOs and FPOs online, from the comfort of your own home. And I use the word “Buy” here very loosely because you have to understand that when you apply for an IPO stock, it is not a guarantee you will get it. I will talk about this in a future post.
For now, all you need to start investing is to get a Bank Account, A DEMAT Account, and a Mero share account to start buying IPO’s in the Primary Market.
You can use this link to login to your Mero share Account if you already have your username and password :
How to Apply for an IPO(Initial Public Offering) using C-ASBA
IPO’s (Initial Public Offering) and FPO’s(Follow-on Public Offering) are shares sold by a company directly to the public. Anyone with money to invest can apply in an IPO or FPO. This can change by the time you are reading this. In which case, there will be a link here. (There is a rumor about the book building system coming into effect).
After that, you will need a C-ASBA account with your Bank. For that, you need to fill a form, at your Bank. It is a simple process that you can complete in minutes. All this does is to help link your bank account to your DEMAT Account. After this, the Bank will give you a CRN- NUMBER (which is like a password), which you can use to apply for IPOs and FPOs in the Mero share Account under the My ASBA section.
All you need now is to put money in your bank account and apply for IPOs and FPOs from the comfort of your home. The process is very straight forward, but if anybody has a problem navigating the system, you can comment down below, and I will be happy to write a blog describing the specifics about using the Mero share system.
But this doesn’t mean you should invest in every IPO and FPO that gets listed. There are pitfalls you should avoid while investing in IPO’S. A lesson I had to learn by making stupid investment choices. So do your research before you invest. And I will be writing about how to do exactly that in future posts.
How to DE-MATERIALIZE your stocks
My parents had invested in the stock market long before I even understood the concept. I used to think getting stocks was like winning a lottery. My parents invested in shares not because they understood it, but because my uncle used to work in finance, and he somehow got my parents to invest in stocks (I am very grateful for that). This was great because my parents unknowingly laid a strong foundation for me to take over. And 7 years later, I am in a position where I can make a few stupid mistakes without losing a lot of money which is not a luxury that everybody has. I have made my fair share of mistakes but all of them have taught many valuable lessons.
So the point is if you have some of those share certificates lying around in your house, then you can take those share certificates and de-materialize them.
For this, you need to go to your capital (I think some banks will also help you to do this so that you don’t have to specifically go to the capital) and ask for a de-materialization form. You should use one for one company (Not one form for one certificate). Then, after the form is filled up you can apply for the de-materialization of your share certificates.
Manual vs The Easy Process of De-Materializing your shares
Now here is the tricky part (if there is any). You can leave your certificate at the capital, and they will do the work for you. But it will take time, and it isn’t so exciting. I, on the other hand, have a fondness for suffering unnecessary pain. You can choose either option. You can take your certificate personally for final approval to the Share Registrars, or you can leave it to the capital.
Each company has it’s own share registrant. After they give you the certificates(If you choose the manual process and decide to get the final approval yourself), you will need to take your certificates to the capital that the certificate is associated with. For, e.g., if you have a CHCL (Chilime Hydro) certificate, you need to take those certificates to Siddhartha capital for final approval and so on for others. If you feel this process is tedious, then you should leave the certificates with your capital, and they will do the job for you(I think).
These steps will help you to get started with Investing in (stocks)Nepal. There are a lot of topics I haven’t touched in this post. Topics such as what are brokers, how to buy or sell a stock, what is a stock. In the future, I will be discussing these topics and more.
- to open a DEMAT Account you first need a bank account
- You can open a DEMAT account via your Own Bank through a Capital Office associated with the bank
- You want to also get a Mero Share account from your bank to buy IPOs and FPOs
- You will also need a CRN number from your bank after you get your Mero Share ID and Password to be able to connect your bank and your DEMAT account
- If you have old share certificated you can de-materialize them from your bank or the capital office
P.S. This post is not sponsored by NIBL, nor am I their employee.