April 16: In the last five years, 136 companies have been listed in the over-the-counter (OTC) market. Of these, only 14 have been registered with the OTC in the current Fiscal Year (FY 2020/21).
However, only about 20 companies were listed during the initial year of OTC registration.
At present, shares of public companies not listed in the Nepal Stock Exchange Limited (Nepse) or removed from the Nepse list are traded through OTC.
According to Chandra Singh Saud, Chief Executive Officer (CEO) of Nepse, investors are becoming aware of the increasing number of companies registering with OTC. He said that the number of registrations has increased as it is difficult for the Company Registrar's Office to keep records without registering with the OTC. The Company Registrar's Office has directed the concerned bodies to transfer and buy shares of the company through the OTC market. There has been good registration and transaction in OTC in the current fiscal year.

Hydropower companies that have not gone public have also registered with the OTC.
According to Nepse, OTC has been traded 287 times in the current fiscal year alone.
As the number of registration and transactions in the OTC market is increasing, Nepse has formed a committee to formulate procedures to make it more systematic.
The committee formed under the coordination of Niranjan Phuyal of Nepse includes representatives of CDS and Clearing House, merchant bankers, and Company Registrar's Office.
Saud informed that the committee formed about two weeks ago would amend the previous work procedure and issue it on time.
"The committee is conducting a study to further develop the OTC market," he added.

Nepse had earlier said that it would start preparations to expand the OTC market across the nation.
However, OTC market requires separate technology and the revenue from this business is not enough to cover the expenses, said CEO Saud. "Therefore, we have tried to move forward by discussing with all stakeholders," he added.
Earlier, Nepse unveiled the work procedure by introducing the policy of OTC, but the issues including, price and tax, were not clear. “Therefore, we are working to formulate a procedure that includes all of them,” said Saud.
The registration and trading of OTC in Nepse started on March 29, 2016.
Maruti Cement was the first company to be traded in the OTC market, followed by Nepal Hydro Developer, Kathmandu Forestry College, Gromore Merchant Banker Limited, and others.
Trading in the OTC market cannot be as effective as in the secondary market. Since such market is erratic and depends on needs, there is not much business going on. There are about 288 companies listed in Nepse. However, only 136 companies have been registered with OTC so far.

Saud informed that an individuals can trade shares of the companies removed from the list of Nepse through OTC.

"OTC trades only sporadically. Not all investors have been given such shares. Especially for founder shares, there is more buying and selling through certain individuals or groups," he said.

The OTC market does not have to be very active. This is a kind of exit system. OTC is an easy way for shareholders to buy and sell shares within the company. As OTC depends on needs, its attraction is not like that of a Nepse-listed company.
According to Nepse, share transactions globally are done through OTC, but in Nepal, there is a misconception that such transactions are done only by inferior companies. Due to such misunderstanding, many companies may not want the transaction to take place through OTC.
There is a provision that shares of public companies that are not listed in Nepse or removed from Nepse's list should trade in OTC. However, to trade in the OTC market, the company should be registered with the concerned company.
There is an arrangement to register the company for free in the market. However, in case of buying and selling of shares, a certain fee has to be paid to the Nepal Securities Board and the securities market. Also, capital gains tax should be paid to the Government of Nepal.

According to the OTC Market Operation Regulations 2065, companies de-listed from Nepse can trade their securities in the OTC market. Likewise, companies not eligible for the listing can also trade their securities.