An auction is usually a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder or buying the item from the lowest bidder.
The concept of auction share is pretty much the same. Investors bid for different prices to get the shares. The issue manager set the minimum price and minimum quantity for the application. Bidders should bid the higher price keeping the minimum price as the lowest price. Shares will be given to those who bid for the higher price.
When is share auctioned in Nepal?
There are three conditions when a company’s shares are auctioned. They are
- Promotor Shares held by institutions
- If all shares are not subscribed in FPO
- Pledged shares by BFIs
How to apply for an auction share in Nepal?
We can not apply for the auction share through the ASBA system from Mero Share or any other online platform. Auction share application must be submitted physically at the issue manager office (or branch offices). Issue date, total issues, minimum application units, minimum price, types of auction share, bank details for payment, and other essential terms and conditions are clearly mentioned in the bid notice. For applying in auction share, the following steps should be followed.
- Visit the nearest issue manager’s branch of head office to get the application for. You have to pay Rs. 100 for the for. You can also download the form from the website of the issue manager.
- Fill up the form with the details i.e., BOID, applied units, bid price, bank account details, personal details. You can get the envelope at the issue manager’s office.
- Include the “Good For Payment” check along with the application or and seal it in the envelope. You can make the “Good For Payment” cheque at your bank.
- If you are applying for a total amount of more than 5 lakhs, you have to mention PAN number.
- If you. are a promotor of the same company then you have to submit income source, tax clearance, and also you must not be blacklisted from the CIB.
- You can check the result in the respective issue managers’ website if you have got the shares.
Things to remember while applying for auction share
Before applying for the auction share, you have to take care of the following things.
- Read the notice details thoroughly. There is a minimum price, minimum quantity to apply, opening and closing date, bank details for payment, types of auction share, terms and conditions that are properly mentioned.
- Study the fundamentals (Balance Sheet, EPS, PE Ratio, Reserves, Net Worth, Net Profit, etc) and technical chart for the price movement. This way, you can get the overall idea of how strong that company is.
- Always submit the application at the end of the closing time so as to know the market price of that company. It helps to compare the LTP and make the optimum bid for the share.
- If you find the company is fundamentally and technical sound, you can bid the price between [minimum price to 10% – 20% lower than the latest traded price in the market.
- Properly check the form before submitting it. Check the number and letter properly in the form to make sure there are not single mistakes.
- Do not bid randomly. You may get the shares but high-priced auction shares may lead you to a big loss. So, be careful when bidding for the price.
Benefits of auction share in Nepal
- No need to pay fees for SEBON, DP, and broker as you directly purchase shares from respective issue managers.
- You can purchase shares in bulk amounts.
- You can purchase shares at a comparatively lower price than the market price.
- If purchased at the optimum price, you can make a good profit in the long term and short term.
Cons of auction share in Nepal
- Auction share cannot be purchased from Mero Share or any online medium.
- 100 must be paid to get the application form.
- Sometimes, it takes a long time to list the shares in the NEPSE.
- Proper bidding prices cannot be determined easily.
- Equal chance of losing money if not properly studied about the company.
- A fundamental and little bit of technical analysis is needed.
How to see auction share notice in Nepal
There are many ways you can check the auction share notice. Some of them are listed below.
- From the respective capital website/social media pages
- From third-party news portal sites such as BizShala.com, NepaliPaisa.com, MeroLagani.com, BitPati.com, ClickMandu.com.
Recommended Link – https://nepalipaisa.com/Investment-Opportunities.aspx
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