KATHMANDU: The Securities Board of Nepal (SEBON) has taken a significant step toward restructuring the country’s capital market by introducing the Guidelines for Mergers and Acquisitions of Securities Firms, 2025.
Under these new provisions, securities brokerage companies are now allowed to merge, a move seen as an effort to strengthen the financial health and operational capacity of the sector. This comes amid growing pressure on brokerage firms to meet the regulatory requirement of having a minimum paid-up capital of Rs 200 million.
While new firms were already required to meet this threshold before acquiring licenses, SEBON had given existing companies a three-year grace period to comply, which is now set to expire in just three months.
Out of Nepal’s 50 licensed brokerage companies, 38 are still struggling to meet the capital requirement. With time running out, these companies are caught between the push for mergers and concerns over sustainability and market competition.
To understand the implications of SEBON’s latest policy shift and what it means for the future of Nepal’s stock market, Khabarhub spoke with Sagar Dhakal, President of the Stock Brokers Association of Nepal, about the opportunities, challenges, and uncertainties surrounding the merger path.
You were asking for time to increase the broker’s capital. But the Securities Board has offered merger as a solution, right?
We had asked for both—merger as well as an extension of time. Previously, brokers operated with a paid-up capital of just Rs 20 million. That requirement has now been increased tenfold, which is a huge jump to manage. Even for margin lending licenses, the fee used to be Rs 50 million—now it’s Rs 60 million. There’s been no clarity on how to adjust for those who already acquired licenses at the earlier rate. Should we be renewing those at the new rate?
When you look at other sectors—like banking or insurance—mergers have always been approached with practical challenges in mind. But this policy came just three months before the capital requirement deadline. That’s not enough time. Companies need to issue a 35-day notice just for the merger process alone, let alone carry out internal work to raise capital.
That’s why we’re requesting a two-year extension. This would offer some relief to businesses during a time of market contraction and allow mergers to happen more smoothly.
There’s only three months left. How do you move forward now?
We’re actively exploring ways to move ahead with mergers quickly. SEBON should allow time extensions for those already moving in that direction. We’re ready to engage in serious discussions with SEBON and explain the real challenges brokers are facing.
Frankly, there have also been lapses in regulatory timing. If the merger policy had been introduced earlier, firms could have moved ahead more strategically—possibly even at a premium. Now that the policy is in place, we need legal provisions and sufficient time to execute it properly.
For example, if 15 days are required for a special general meeting, that’s 15 days right there. Merging company data takes time. For those who have already signed MOUs, a flexible middle ground should be created.
What benefits do you see in merging more than two brokers?
There are several. For one, operational expenses are reduced significantly—whether it’s employee salaries, TMS premium fees, office rent, or payments to regulatory bodies like SEBON and NEPSE. Even recurring costs like electricity and internet go down. When brokers merge, their client base combines, and naturally, the trading volume increases. That, in turn, boosts income.
We’ve seen how private sector investment—Rs 11.6 billion—was brought in with the hope that brokers of similar capital size would help develop the market. New brokers entered the scene, bringing better offices, stronger human resources, and more structured operations. Before this, investors often faced distrust and inconvenience at older broker offices. So yes, there’s been visible improvement.
But even now, capital is seeking returns and not finding them. If we can’t introduce new products or services, that capital will remain idle. For example, if merchant banks with Rs 50 million can offer portfolio advisory, why can’t brokers with Rs 200 million capital? If such services were allowed, it would help grow business. But right now, that scope isn’t available.
Some older brokers may lack capital but have strong customer bases. Post-merger, both capital and technology improve, and client management becomes more streamlined. In the long run, it makes sense to move toward bigger, more reliable institutions—with public participation and better governance. Eventually, if such merged entities go public and issue IPOs, that will boost transparency and strengthen Nepal’s capital market.
There are challenges when merging two or more brokerage companies. How should these be addressed?
There will always be challenges, as we’ve seen in the banking and insurance sectors. One common issue is internal factionalism—disputes between employees of the merging firms. The current merger guidelines have acknowledged this and suggest that such matters be resolved first. They even include provisions to allow both companies’ senior staff to continue operating as branches.
There’s also the question of excess staff post-merger. Should we offer voluntary separation schemes or manage employee shifts through branch transfers? Fortunately, brokerages don’t typically have large employee numbers, so these issues are more manageable. With thoughtful planning, we can navigate these challenges and ensure that the merger benefits both businesses and the broader market.
When there is a merger, transactions should be conducted through a single TMS. Doesn’t that create complications for customers?
Actually, no. All the back-end systems are ready. There’s no need to disrupt customer activity—it doesn’t even take a day. This concern did come up during discussions on the working procedure. When the question of managing two TMS systems came up, we sat with the technical teams and concluded that all data could be merged seamlessly in the back-end. If we take advantage of Friday and Saturday holidays, we can align the launch with the next trading day. So, it doesn’t affect investors at all.
Many customers have relationships with specific brokers. Isn’t there a risk of losing clients when firms merge and grow bigger?
We need to shift toward a more professional approach. This business should no longer rely on personal ties or familiarity. Service quality should speak for itself. Anyone who joins an organization should receive consistent, high-quality service—regardless of who is personally available.
Service is what wins customer trust. If that falters during a merger, clients will leave—because they have options. The future of this profession is in service, not relationships. If department heads and staff maintain service standards, even customers unfamiliar with the team won’t feel a difference. Personal relationships can only go so far—scalability demands professionalism.
Our broker industry should develop with this mindset. When general investors seek service, they should judge us on quality, not familiarity. If we fail to meet expectations, customers will simply go elsewhere.
Are newer brokers more interested in merging, or is it the older ones?
There are two approaches—old merging with old, or old merging with new. As president of the association, I represent the collective interests of both groups. Merging an old and a new broker works well too. New brokers may have fewer clients, but older ones bring experience. Together, their capital and customer base can balance out. With a strong agreement, such partnerships can be very effective.
Some are even discussing merging eight to ten companies and moving into dealership roles with capital around Rs 1.5 billion. These conversations are happening at different levels within the industry.
You are with Himalayan (Broker No. 63). What’s your position on mergers?
Right now, we’re not planning to merge. Our focus is on growing the business. But we are open to discussions—whether that means entering the dealer category or moving to a higher operational level. If viable options come up, we’re ready to consider them. For now, we’re concentrating on expanding our services and improving our performance.
Finally, what message would you like to give?
Mergers are in the pipeline. The policy is already out, and even if there are minor delays, things are moving. Now, SEBON should work quickly and give us a timeline. Until the board sends it, there’s no reason for the Finance Ministry to take it to the Cabinet. If we get more time, everyone in the industry can comfortably prepare and move forward under the same framework. No broker is saying they won’t raise capital—so extending the timeline would help create clarity and cooperation.
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