Ask almost any retail investor in Nepal what they do when a new issue opens, and the answer is the same: apply. Apply to this one, apply to the next one, apply to the hydropower one and the microfinance one and the one nobody has heard of. The minimum application is 10 units, NPR 1,000, and the logic feels airtight. Why would you not? You might get free money.
So should you apply for every IPO? For most ordinary par-value issues, the reflex is actually defensible. But “apply to everything” has quietly become the national habit, and a habit is not a strategy. There are issues in this market where you can genuinely lose money, and there are weeks where applying to everything ties up cash you needed elsewhere. This piece is not a yes or no. It is a framework for deciding, issue by issue, when the reflex is right and when it is lazy.
If you are still unclear on how the lottery actually decides who gets shares, read our companion piece on how IPO allotment works in Nepal first. This article assumes you know the mechanics and focuses on the decision.
Why “apply to everything” is rational for the ordinary IPO
Start with why the reflex exists, because it is not stupid.
Most IPOs in Nepal are issued at par value, NPR 100 per share, by companies coming to market for the first time (SEBON, Market Readiness for Book Building Pricing in Nepal). You apply for the minimum 10 units, NPR 1,000, through the ASBA system on Meroshare. The money sits blocked in your bank account; it is not spent.
Then comes the part that makes Nepal unusual. When an issue is oversubscribed, and almost all of them are, shares are allotted by a digital lottery in which every valid applicant gets the same minimum allotment if selected, regardless of how many units they applied for. Apply for 10 units or 500, your odds of being picked for that base allotment are effectively the same. This is an egalitarian design, and it changes the math completely. The small applicant is not at a disadvantage to the large one.
So for a par-priced ordinary IPO, the trade looks like this. You block NPR 1,000 for a couple of weeks. If allotted, you typically get 10 shares at NPR 100 that, for most ordinary issues, list above par on the secondary market. If not allotted, your NPR 1,000 is refunded. The downside on the application itself is close to zero, because the share is issued at face value and the company has cleared SEBON’s basic listing bar.
That asymmetry, small blocked cash against a free shot at a listing gain, is why “apply to everything” took hold. For the genuine par-value IPO at the minimum unit, it is a reasonable default. We will not pretend otherwise.
Where the reflex breaks: book-built and premium issues
Here is the distinction most investors blur, and it is the heart of this article. Not every “IPO” is sold at NPR 100.
Nepal has moved beyond the single fixed par-value model. Under the book-building method, companies that meet SEBON’s eligibility bar (broadly, profitability over recent years and net worth per share well above paid-up capital) can issue shares at a premium, meaning above NPR 100 (Investopaper, Book Building Method in Nepal; Siddhartha Capital, Book-Building Method). The price is not set by the regulator at par. It is discovered through bidding by qualified institutional investors, who take a portion of the issue, and the general public then buys at a stated discount to that institutional cut-off price (Nepal Economic Forum).
Read that again, because it matters. In a par IPO, your entry price is NPR 100, a number with regulatory and book-value meaning behind it. In a book-built premium issue, your entry price might be NPR 270, NPR 400, NPR 600, whatever the institutions bid minus the public discount. The public discount cushions you a little. It does not protect you. If the institutions overpaid in their enthusiasm, you are buying a slightly cheaper slice of something that was already expensive.
The same logic, only sharper, applies to FPOs.
FPOs are a different animal; treat them that way
A follow-on public offering, or FPO, is when a company already listed on NEPSE issues fresh shares to the public. The difference from an IPO is decisive: there is already a market price. (For the full taxonomy of issue types, see our explainer on the difference between IPOs, FPOs, and rights shares.)
FPOs are routinely priced at a premium. SEBON sets FPO pricing using a blend of methods, including net worth per share, the 180-day average closing market price, capitalized earnings, and discounted cash flow, and the issuer prices off the average (Nepse Khabar, beginner’s guide to FPO and secondary market). So the FPO price is anchored to where the stock has been trading. And here is the trap. If the market falls between the time the price is fixed and the time the new shares list, the freshly issued shares can list below what you paid for them.
That is not a theoretical risk. It is the structural difference between a par IPO and a premium FPO. With a par IPO at NPR 100, there is almost no room to list below your cost. With an FPO priced at, say, NPR 300 against a falling market, there is plenty. You can apply to an FPO, get allotted, and be sitting on a loss on day one.
So the blanket reflex, the one that serves you fine on par IPOs, is exactly the wrong instinct on premium book-built issues and FPOs. These you have to think about.
The hidden cost nobody counts: blocked funds across overlapping issues
Even for the safe par-value IPOs, “apply to everything” is not free. The cost is opportunity cost on blocked cash, and it bites hardest in busy weeks.
Your application money is held under ASBA from the moment you apply until allotment and refund, which can run a couple of weeks. One issue, NPR 1,000, nobody notices. But Nepal often has several issues open in overlapping windows, plus the larger applications some investors make in family members’ demat accounts. Suddenly NPR 50,000 or NPR 1 lakh is locked across five or six issues at once.
Most of the time that is fine, because the cash was idle anyway. It stops being fine in two situations. First, if you would otherwise have parked that money in a fixed deposit and earned interest or kept it deployed in the secondary market. Second, if a real expense lands during the blocked window, a fee, an EMI, an emergency, and your liquid cash is sitting frozen in five lottery tickets.
The point is not that blocked funds are a disaster. It is that the cost is not zero, and you should size your applications to cash you genuinely do not need for the next few weeks. Applying to every issue with money you might need is how a costless-looking habit turns into a cash crunch.
A framework, not a reflex
Put it together and you get a decision process that takes about thirty seconds per issue.
First, ask what kind of issue this is. A par-value ordinary IPO at NPR 100 is the low-risk default. A book-built premium IPO or any FPO is a different category with real downside. If you cannot tell which it is from the prospectus or the issue notice, that alone is a reason to slow down. (Learning to read an IPO prospectus is the single best habit you can build here.)
Second, for par IPOs, apply at the minimum almost always. The asymmetry is in your favor, and the lottery is egalitarian. The only reasons to skip are a genuine cash crunch or a company so weak you would not want the shares even at par.
Third, for premium and FPO issues, do the work you skip on par issues. Is the price sensible against the company’s earnings and net worth? Is the company in a sector you would actually buy into, or just another microfinance or hydropower name in a crowded queue? Where is the broad market heading, given that a falling market is what turns a premium issue into a day-one loss? If you would not buy the stock on the secondary market at roughly the offer price, do not apply just because it says IPO.
Fourth, check your own liquidity before you check the issue. Decide the total you are willing to have blocked across all open issues this month, and stop there.
Fifth, separate the application decision from the holding decision. Getting allotted is not a reason to hold forever, and the tax treatment differs by holding period. Before you sell a listing gain, understand the tax on IPO profit, because the headline gain and the after-tax gain are not the same number.
The verdict
Should you apply for every IPO? For ordinary par-value IPOs at the minimum 10 units, nearly always yes, and the egalitarian lottery is the reason the reflex survives contact with logic. The downside on a NPR 100 issue is close to nothing, the cash is only borrowed for a fortnight, and the small applicant is not penalized.
But “every IPO” is the wrong phrase, because not every issue is that issue. Book-built premium IPOs and FPOs are priced above par, sometimes well above, and they can and do list below what you paid. On those, the blanket reflex is not a strategy, it is a way to lose money politely. Apply to them only when the price makes sense, the company is one you would own anyway, and the market is not falling underneath you.
The cheap, egalitarian par-value IPO earned the reflex. Do not extend that reflex to issues that have not earned it. That is the whole framework, and it is more discipline than most of the market practices.
This is analysis, not financial advice.
