Kathmandu

“Investment Talk,” the talk show that takes a deep dive into the world of merchant banking, finance, and investment strategies. The show engaged with seasoned professionals, experts, and thought leaders in the field, exploring the latest trends, success stories, and valuable insights that shape the dynamic landscape of merchant banking.

In the inaugural episode, we had the privilege of discussing various segments of merchant banking and the capital market with Sabir Shrestha, a professional merchant banker and the Chief Executive Officer (CEO) of Citizens Capital Limited.

Shrestha emphasized the core responsibility of mutual funds, highlighting that their primary role is not to act as a financial rescue entity in unfavorable market conditions. However, he acknowledged their crucial role in stabilizing and contributing to the market’s viability during bearish markets or downward trends.

“Despite the positive contributions of mutual funds, there has been criticism directed towards merchant banks, alleging that they withhold liquidity and refrain from injecting cash flow by purchasing stocks during bullish markets.”

Shrestha clarified that these mutual funds consist of investments from the public, underlining the importance of considering the interests of those who have purchased them.

“For instance, during a market decline from 2600 to 2200 points, media and other stakeholders informally requested market rescue efforts.”Shrestha pointed out that entering the market during that period could have led to a significant downturn in the fund’s status, potentially reaching 1800 points.

Shrestha also emphasized that a mutual fund should not be perceived merely as a secondary stock market but rather as an alternative avenue for saving or fixed deposit. He clarified that the fund is designed for long-term and midterm investments, with a maturity period ranging from four to eight years. During this period, investors can expect to receive dividends based on prevailing market conditions.

Discussing the objectives of Private Equity/Venture Capital (PE/VC) funds in Nepal, Shrestha highlighted their focus on investing in startup companies with a minimum capital requirement of Rs 5 million from any individual or company, without the need for collateral. He likened the concept of PE/VC to a blank canvas, suggesting a creative opportunity for venture companies, merchant banks, and other stakeholders to collaboratively paint a beautiful and successful picture.

As a merchant banker, Shrestha called for a reevaluation of the policy setting 10 shares equivalent to Rs 1000, expressing concerns that it encourages malpractice. He observed that a significant portion of the public tends to invest without conducting thorough research on the company. This lack of scrutiny, combined with the existing policy, can lead to situations where underwriters may become complacent in adequately preparing for IPOs, resulting in oversubscription.