SEBON- FPO and Valuation

In my personal opinion the mechanism introduced by SEBON  will bring some cheer and some confusion. Although this is a good step towards Fair Market valuation, there are too many discretionary variables. In the coming days, if not already, SEBON might need to setup an Investment Committee or Panel of Expert to approve the assumptions being consider for  FPO valuation.  

For example:

•  Discount rate needed to calculate Discounted Cash Flow will depends  on the risk adjusted return of the individual company. Discount rate will also differ from company to company even in the same industry .
•  Similarly, on the Terminal Growth Rate-  Terminal Value of a company that owns a limited life asset (Hydro), should and will differ from perpetual nature type business (Commercial Banks/ Insurance) . 
•  For 180 days average trading  price method- I think it would be  better if the liquidity factor of the share traded is also considered, if not there is a risk of artificially inflating or deflating the price - Pre FPO.
• Apart from the listed criteria, as an individual investors,  I also hope that  for the listed companies SEBON only allows  Merchant Banks (Under writers) to do the valuation and not CA Firms. This way Merchant Banks will have "Skin in the game" and hopefully will not suggest an arbitrary price. In addition,I wish some minimum Credit Rating is also set as one of criteria. 

As for the NRB lock stepping with SEBON for deciding the repatriation of FDI using the same principle , it would definitely be a very  good start. If NRB adopts SEBON's terms then they should also allow exercising of put option if  trigger price/ IRR is within the Discounted Cash Flow price cap for unlisted companies . 

Green Bonds for Nepal Hydro

ISSUES 

• 42 GW  Hydro Potential ( Most of the project are ROR ) 

• Only 700 - 800 MW harnessed 

• Investment of about $7 to 8 billion each year

• Limited capacity of Local Banks to finance all the capital required 

• Non recourse project financing still not being tried by Local Banks 

Possible Solution

• Similar to Indian Masala Bonds 

• Rupees Denominate  offshore issue bond 

• For example: Comps like GMR issues INR Bond in offshore (London, New york), proceed use to finance hydro project in Nepal. PPA in NPR. Less foreign exchange risk  
• Backstop by DFIs including IFC and ADB

RISK

• No sovereign Credit rating of Nepal 

• Local Law limits Interest rate charged for foreign Debt - LIBOR + 5.5 

• Counter party risk 

• Dropping Energy prices in India.. 

Crisis of confidence

On 14^th November, 2015 government of Nepal announced that it will be distributing fuel wood to pacify the hardship of acute fuel crisis faced by Nepali due to the ongoing “unofficial” blockage, political protest and disturbances in the major transit points. This benevolent gesture from the government could perhaps be the biggest blow to the nation touted as “hydro energy power house of South Asia”. Distribution of Fuel wood as a tool to response to energy security re-exposes Nepal preparedness and commitment for the sustainable development of its economy. Similarity, Myriad of frustrated, and fatigued consumer lining up for days with a hope to get half filled cylinders and fuel tanks is a tight slap to the rhetoric and hallow narratives that Nepal has “potential” to exploit 42 GW of hydro energy. This is the same rhetoric which we as a nation have been humming since mid-sixties, but till date not even 1% of the “potential” has been executed into reality.

With our myopic view and short lived memory we have time and again fall short  to learn critical lesson from our or others  past mistakes, but this time it should be different. This time stakes are too high, with the triple whammy of twin earthquakes, Madesh unrest and trade blockage, Nepali economy is almost to its keens. Some unofficial estimate suggests the economy has taken a negative toll of almost 50% of its GDP this year. Before it is too late, the government should immediately launch projects and polices that could be swiftly executed or be materially exhibited.  Be it merely on paper but the parliament immediately endorsing or introducing new acts and regulations to impetus the economy, will symbolize commitment and assist to aid the crisis of confidence Nepali economy is facing. This time, destitution Nepal is facing should be used as a catalyst to ignite long overdue second phase to economic liberation, and most importantly endorsement of Reconstruction Authority Act.

Execution is the key. Let us not waste time drafting new policies and white paper, just start executing. Noting is perfect, first build things and then start deciding how could it have been improved from the policy end. 

Government and Policies markers should need to start lean... 

India's distribution company and Power Trade agreement

We often here that once the Nepali power plant meet the domestic demand, surplus power will be exported to India.. Recently came across a report, which paint a very gloomy scenario of some of the power distribution companies of India, particularly state owned dis-com of states neighbouring Nepal .... Wondering how Nepali energy will complete will India Energy and revenue risk associated with unhealthy financial situation of the discom companies

5 things among other initiative government can do to bounce back Nepali Economy… I think

·         Launching Government startup fund – organize business plan competition for pre fab housing protype, future natural disaster prevention, mitigation  app or technology. Provide seed capital to top 5….

·         Legalize marijuana and encourage ganja puffing tourists. Will increase tax revenue and boost tourism. If stoned already no stone can do harm... :-)

here is a proof 

·         Sovereign Credit Rating – economic cost of earthquake estimated around 50% of the GDP.  Thats about US 10BN. Government can raise domestically about 3%- 5% of GDP (1BN) without raising any eye brows of IMF. Rest need to be financed through external source. To raise international debt a proper sovereign rating from credit rating agencies could be useful. Shadow rating (CCC+) we currently follow does not take into factor like positive impact remittances in rating. Sovereign Rating also helps credit appraisal of big scale hydro projects & to calculate actual country risk premium……..Nepal is all over the news around the world, get cash it

·         Housing mortgage interest expense deductible from Income tax: No doubt that housing market and real estate has suffered. To buttress rebuilding houses, government could allow deducting interest expense paid for mortgage from Income tax.

5/6/2015 - Nepal economic situation and trend

As the rescue work is all most done, relief works are under-way, it looks like relief effort will wind  down in couple of weeks....Now the turn comes for RECONSTRUCTION..Before I start  writing my thoughts on RECONSTRUCTION, I would go back in time and highlight few macroeconomic figures and trends in  Nepal before the devastating earthquake

• Nepal’s economy grew by an estimated 5.2% in fiscal year (FY) 2014 - See more at:  Source: http://blogs.adb.org/blog/adb-s-initial-analysis-economic-impact-nepal-earthquake#sthash.tslN7qRq.dpuf

• Balance of payment  SURPLUS till first half of 2015 was USD 349.2 MN (ADB) 

• Gross foreign exchange reserves till mid jan 2015 was USD 7.1 BN

• Nepal had signed PTA with India 

• Nepal has signed PDA with couple of hydro projects 

• International Banks including Societe Generale was in Nepal for appraisal for a hydro project 

• Total Market cap for stock market was about USD  9 + BN  (ADB)

• FDI commitments increase was in three digits percentage 

• Total government expenditure about NPR 618 BIllion or 28% of the GDP (ADB)

• Inflation : 9% (ADB)

• Average base rate of commercial Bank : 8.75% (ADB)

• Remittances = $ 5.5 billion or 28.2 % of GDP  (ABD)

................................................................................................................................................................................

N

BEFORE YOU LAUNCH

Launching a new company presents unique challenges to the entrepreneur. Sorting out these hurdles as you is the only way to go about it.

A couple of weeks ago, as a part of my usual deal scouting and exploring investment opportunities in the healthcare sector, I came across two young entrepreneurs. They were a few years out of college, and ready and enthusiastic to launch their ideas. These two aspiring entrepreneurs are working on a startup called E-aausadhi that plans to become an online, on- call pharmacy that will home-deliver medicine around the clock, with cash-on-delivery payment system. Despite having a credible business model (at least on paper) and relevant expertise of the founders (one of them is a medical doctor and the other a software/application developer), the venture is yet to be launched. Curious, I asked them why they hadn’t fully launched yet. Like many other fledging entrepreneurs, the founders of E-aausadhi confessed inability to secure loans or additional capital from their family and friends as the biggest road block between them and the launch.

Understanding their fairly reasonable reasoning behind not fully launching their idea, we brainstormed to come up with the following five strategies to launch their yet to be validated business idea, while at the same time keeping the startup cost at a minimum. Click Here to read more 

ENABLERS FOR THE VENTURE CAPITAL INDUSTRY IN NEPAL

While the local venture capital (VC) industry is still in its pre-fledlging phase, the future prospects in Nepal have started to brighten up.

While the local venture capital (VC) industry is still in its pre-fledlging phase, the future prospects in Nepal have started to brighten up. With a relatively stable economy and rapidly growing disposable income, it should come as no surprise that the demands for investment continue to increase. VCs are finding several sectors particularly attractive – information technology, education, healthcare, agriculture, and tourism amongst others. Investment opportunities are also arising in more niche sectors like organic agri-business and handicrafts. Although an enabling environment for VC industry is broadening, it still has a long way to go. The four enablers that could support venture capital, help mature our entrepreneurial landscape and improve investors’ sentiments are the following: Click Here to Read 

Nepal Tourism Industry and entrepreneurial opportunity

Government and the Promotion of Entrepreneurship in Nepal

IFC asks govt to bring guideline on rupee bonds | Business

IFC asks govt to bring guideline on rupee bonds | Business

With Local capital already limited,and volatile exchange rate is this a good option ?

IFC concerned about NEA’s dilly-dallying over PPA | National | Business

IFC concerned about NEA’s dilly-dallying over PPA | National | Business

"Lower Solu Project Director Ashish Garg said the MoE and NEA have been postponing the PPA signing date, citing the lack of budget for the construction of transmission lines. Issuing the licence to these projects, the government had pledged to construct the transmission lines.

The projects have paid a combined Rs 450 million in licence fees and have provided bank guarantee worth Rs 101 million. NEA Managing Director Rameshwor Yadav also said the NEA has not been able sign the PPA due to the possibility of wastage of energy during monsoon after a few years."

Lower Solu in the past has gained lot of attention from  Development Finance Institutions (DIFs) for investments...NEA being  reluctance will not send a good signal to potential foreign investors...... 

Small Hydro Power and Venture Capital in Nepal

A recent published white paper from Alternative Energy Promotion Center (AEPC) mentions the need  of venture capital/ equity investment to ease the access to finance situation in the small hydro power segment...

This is what is mentioned in the white paper :- "

Assistance in Raising Equity and loans

  "Local community/developer need to be assisted/supported in equity and loan, equity investment, venture capital investment fund, long term soft loan etc.

Venture Capital system should be established. A study on how venture capital provision may be introduced in Nepal including long term soft loan and equity investment."

The white paper mentioned "  A study on how venture capital provision may be introduced in Nepal " My recommendation is to cover the following issues in the study  

• Quality of deal flow- Not  just " Jhola ma Khola" 
• Issue involving cost of capital, considering floating interest rate 
• Taxation issues, tax incentives 
• Lock in period 
• Exit options & incentives while exiting for venture capital investors
• Financial instruments that can be used 
• Possibilities of   patient capital, including first loss option 
• Environmental, social and governance risk 

Contact me for additional thoughts and comments 

Cement Industry in Nepal

1. "Nepali cement is meeting only 75 percent of domestic demand, according to the Cement Manufacturers Association of Nepal. Cement and clinker worth Rs 4.53 billion have been imported in the first nine months of the current fiscal year, according to the Trade and Export Promotion Center. Cement is imported from India and the big development projects in Nepal are using imported cement. " 
2. "Entrepreneurs claimed that the projects are buying foreign cement due to the waiver in customs duty and value-added tax (VAT) while importing construction material for the national priority projects."
3. According to the Cement Manufacturers Association of Nepal (CMAN), the domestic cement industry has an installed production capacity of 5.58 million tonnes annually which is slightly higher than the annual demand of 5.42 million tonnes. However, cement manufacturers say their plants could have utilized their full capacity except for supply side constraints and government apathy.
   
   However, this hasn’t stopped the private sector from entering this sector in a big way. Currently, there are 42 factories in operation producing 3.90 million tonnes of cement annually. Local production fulfils about 72 percent of the requirement and the rest is met by imports from India. Nepal produces OPC, PPC and PSC cement, of which OPC is preferred these days.
   
   Out of the 42 factories, only 10 also produce clinker, a major raw material used in cement production. Nepal used to depend on India for 90 percent of its clinker requirement. However, with more factories now setting up clinker production units after acquiring limestone quarries, imports from India will decline in the coming years.
   
   With these upcoming projects and capacity enhancement at a number of existing cement factories; the country will be able to substitute around 80 percent of its cement imports from India within the next few years.
4. The Bureau of Standards and Metrology reasoned that the big projects cannot trust domestic cement as the majority of manufacturers take permission for one brand and produce another. Only 22 cement factories have obtained Nepal Standard (NS) mark from the bureau till now.

Source: KP,Karobar,THT
Here is an excellent report on Nepali cement industry analysis. 

Our Analysis in of the cement industry in Nepal 

• Foreign Investors and Foreign contractors operating in Nepal prefer high quality cement, mainly imported  from India. They simply do not trust quality of cement made in Nepal. With increasing foreign Investment in Mega Hydro projects, investing in  cement factory producing high quality cement will be a viable options for the  potential investors. 
• Valuation of a cement company: If a potential investor is planning to buy an existing cement company, the investor should not may more than NPR 5000 per tone.... 

For more analysis-contact us

CDC's Frontier Investment strategy might also focus in Nepal

This is what there website say

"In its initial phase, the team will focus on a small number of geographies such as Northern Nigeria, South Sudan, Nepal and Myanmar. The Frontier Investments team will complement the strategies of CDC’s four core investment teams and may provide capital in all its forms. - See more at: http://www.cdcgroup.com/How-we-do-it/Types-of-capital/Frontier-investments/#sthash.EuPFtaW8.dpuf

Millionaire Shesh Ghale for commercial investment fund & social Investment Fund

"My focus would be on increasing capital investment and welfare activities in Nepal. Reviewing past work, I will continue the existing agenda of the NRNA. I have planned concentrating on two agendas—commercial investment and social investment funds. The commercial investment fund will be mobilised for the country’s economic development, while the social fund will be mobilised for charity work or to help the underprivileged people." click here to read more 

Investor confidence reaches new high as Chitwan tourism rebounds | Business

Investor confidence reaches new high as Chitwan tourism rebounds | Business

Supporting entrepreneurship in Nepal

Here are few suggestion

1. Establish ‘Single Window Clearance’ mechanism for starting a business, and establish time-bound processes for the same.
2. Set up online information and application portal for processes relating to doing business.
3. Permit self-regulation and self-compliance for businesses with turnover less than Rs 25 crore. Stringent penalties may be used to prevent potential misuse.
4. Facilitate labour law reform and ease compliance norms with labour laws. This is essential in triggering entrepreneurial activity in core sectors.
5. Ease investment and exit norms for equity investments into early stage ventures.
6. Establish expeditious procedures for closing of businesses, thereby bringing down the time, cost and complexity of doing so.

Source: StartupCentral 

Do MFIs measure their social impact in Nepal ?

You often hear Nepali MFIS blowing horns of their success by indicating their customer base growth rate
MFIs needs to go beyond tracking -  Number of Customers reach to measure their social impact... Here is an excellent case study on social impact measuring metrics of MFIs............................Click here to read 

News: IFC's Chief investment officer, private equity funds on Nepali private sector

"IFC works in countries all over the world with all sorts of political situation. This is not new to us. What is important is that small businesses thrive regardless of what´s going around them. The politics and the government do not matter much to them because they are focused on their own businesses. And on top of that they need money to grow. So investments in SMEs are really good investment."

Click here to read more 

News: सहकारीद्वारा ६ अर्ब ठगी

This news to me sounds like a fusion between United states sum prime crisis and India's micro finance crisis..  

Top Challenges of Nepali Micro finance industry -2013

• Saturating customer base
• Mission Drift 
• Customers multiple financing and over leverage
• Profiteering mindset of MFIs
• Lack of  appropriate tools to measure social impact of access to finance 
• Unhygienic corporate governance standard 
• Lack of know-how to leverage technology to increase penetration and reduce cost of transaction     

NEWS : First Venture Fund for Nepali SME Launched......

"Business Oxygen (BO2) is a USD 14 Million Small and Medium Enterprises (SME) Ventures Fund, initiated by International Finance Corporation (IFC) and managed by a joint venture between beed and Bank of Kathmandu (BOK). The Fund will invest in SMEs in Nepal and open up, for the first time, access to finance outside the traditional realms of providing collateralized loansBusiness." Click here to learn more

proposal: Nepal- ACCESS TO CLEAN ENERGY THROUGH MICROFINANCE

"The UN Capital Development Fund (UNCDF) and  the United Nations Development Programme
(UNDP) are launching a Request for Expressions of Interest (EoI) for the Access to Clean Energy
for the Poor through Microfinance (CleanStart) programme in Nepal. The EoI is open to eligible
financial service providers (FSPs) who have retail or wholesale  operations in Nepal.  The
programme will award grants and technical assistance  to leading FSPs to create new financing
models and expand their retail  or wholesale operations  in the  clean  energy  markets in
particular to provide microfinance for clean energy  solutions  to low-income households and
micro-entrepreneurs in areas which are underserviced at the moment.  CleanStart will operate
over a period of four years (2012-2015) in Nepal, and provide business development support to
up to three qualified financial institutions" Click here to read more

Government investing in Co-operatives run by marginalized groups

DoC plans co-op subsidy guidelines | National | Business | ekantipur.com

Government decided to provided seed money to run co-operative run by the low-income and disadvantage population. Can this we considered impact investing ?

"The programme has targeted the poor from underprivileged communities like Haliya, Kamaiya, Dom and Musahar. It has also targeted promotiung cooperatives operated by low-income people like rickshaw pullers and single women."


..............................................................................................................................................

Related news from India - "  A venture capital fund, dedicated to promoting Dalit entrepreneurs, has been registered by market regulator Sebi, paving the way for creation of a corpus to support businesses owned by people from the Scheduled Castes." click here to read more 

IFC to invest in Probiotech - Detail News : Nepal News Portal

The Himalayan Times : IFC for equity investment in Probiotech - Detail News : Nepal News Portal

"After the agreement, the due diligence of Probiotech will finalise the equity per cent and capital the IFC will pump in, the sources claimed, adding that IFC might pump in around $200,000 but it will be finalised only after due diligence that will start from mid-January, if everything goes as planned. According to International Finance Corporation norms, it cannot invest more than 25 per cent equity in a company."


Similar kind of private equity deal took place in India couple of weeks ago....  Temasek  holding bought 20% of the share in Godrej Agrovet, a diversified agri-business company,that has interests in animal feed, oil palm plantations, agri-inputs and poultry. 

Click here to read more 

Nepali students leveraging mobile technology to learn English

" सहरका विद्यालयले मोबाइल फोनमा प्रतिबन्ध लगाइरहँदा दैलेखका ग्रामीण विद्यालयमा त्यही मोबाइल भरपर्दो शैक्षिक सामग्री बनेको छ । पठनपाठनलाई प्रभावकारी बनाउन यहाँका अधिकांश विद्यालयले मोबाइल प्रयोग गर्छन् । केही विद्यालयले सुरु गरेको यो अभियानले सकारात्मक परिवर्तन देखाएपछि अन्य विद्यालयले पनि जेठदेखि मोबाइललाई शैक्षिक औजारका रूपमा प्रयोग गरिरहेका छन् । मोबाइल प्रयोगको ६ महिनामै विद्यार्धीको नतिजामा सुधार देखिएको छ ।
दैलेखका ५ सय १३ प्राथमिक विद्यालयका ५ सय २५ अंग्रेजी शिक्षकलाई मोबाइल फोन भरपर्दो पाठ्यसामग्री बनेको छ । कक्षा १ देखि ५ सम्मका अंग्रेजी विषयको पाठ्यवस्तु सबै अडियो (श्रव्य)मा राखिएकाले मोबाइलबाटै सुनाएर पढाइन्छ ।"

Click here to read more 

Nepal Insurance Board introduced micro-insurance products

• Non life insurance companies will offer insurance products for paddy, vegetables,potato,poultry, fruits and livestock 
• " Crops insurance will cover production cost involved in farming of all crops and horticulture until the time they are ready for harvest. This includes cost involved in purchase of seedlings and fertilizers, and labor charge, among others. However, insurance coverage will not be provided in case plantations are done on less than eight aanas (2,738 sq ft) of land in hilly region and one kattha (3,645 sq ft) of land in the Terai"
• "On the other hand, livestock and poultry insurance will provide coverage to all types of cows, oxen, buffalos, yak, female yak, sheep, goat, swine, chicken and ducks based on sum insured fixed by the Insurance Board.
  
  For instance, maximum sum insured for high-breed dairy cow and buffalo are Rs 150,000 and Rs 125,000, respectively. This means those who have purchased cow and buffalo insurance policies cannot claim for more than Rs 150,000 and Rs 125,000, respectively. Similarly, sum insured for water buffalo and ox raised for reproductive purpose has been fixed at Rs 70,000, while insurance coverage for water buffalos and oxen used for transportation purpose has been fixed Rs 40,000.
  
  Likewise, sum insured for sheep and goat raised for meat production cannot exceed Rs 8,000, while maximum insurance coverage for different types of chicken and duck have been fixed at Rs 1,200 and Rs 700, respectively."

Source: Republica*

Investment Nepali Healthcare

Over the recent years increasing number of  private hospitals have cropped up around the country ... Even though the number of hospital beds have increased over the years, access to affordable healthcare still remain  a challenge..... Economist Kancha sees   tremendous opportunities to invest in heath care sector- particularly in single specialty chain and diagnostic laboratories. 

 Why Potential Investors should look into investing  in -----Single Specialty Afforable Chains of Dailysis centers 

• one in every 10 Nepali people suffers from kidney problem and around 27,000 patients need renal transplants
•  There are only 140 dialysis machines in 25 hospitals and private clinics across the country, which are able to provide the service to only around 1,000 kidney patients.

Click here to see  interesting healthcare  business models

1.  Private equity pours money into India healthcare.
2. Frugal innovation: Devi Shetty's Narayana Hrudayalaya to conduct heart surgeries at world's cheapest rates

Impact sourcing in Nepal

For the first time last week, I heard the word-" Impact sourcing" form a article in HRB. According to the article the definition is "A small but growing industry known as “impact sourcing” is addressing that need head-on by hiring people at the bottom of the pyramid to perform digital tasks such as transcribing audio files and editing product databases. Essentially, it’s business process outsourcing aimed at boosting economic development." click here to read more 

...................................................................................................................................................................
Finding this idea very interesting, did some research to explore  opportunities for the similar kind of concept in Nepal ....During the research learned about a company called Cloud Factory,which has been operating  from Nepal for the past couple of year and was 'doing' impact sourcing .. Beginning of this year Cloud Factory raised $700 K ....For sure a company to keep a watch on ...... source: http://www.techinasia.com/nepal-startup-cloudfactory-raises-700000-funding/

IFC helps Nepal develop payment system

IFC helps Nepal develop payment system MYREPUBLICA.com - News in Nepal: Fast, Full & Factual, POLITICAL AFFAIRS, BUSINESS & ECONOMY, SOCIAL AFFAIRS, LIFESTYLE, SPORTS, OPINION, INTERVIEW, INTERNATIONAL, THE WEEK news in English in Nepal

Biggest Challenges for Venture Capital and PE

Commercial farming and farm insurance in Nepal

Source: Myrepublica  "The government has prepared a draft of the new Agriculture Enterprises Promotion Act that among other, envisages to pave the way for contract or lease farming and promises incentives to insurance companies to sell farm insurance policies. The draft prepared by the Ministry of Agriculture Development (MoAD) in association with the Agro Enterprise Center (AEC) of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) will soon be circulated among local stakeholders in the different development regions for feedback, said a senior government official. Keeping in view the large swaths of land being left fallow by landlords, the government came up with the legal provisions to make sure that proper use of cultivable land through contract and leasing system is introduced in the country. “Though we have large tracks of land abandoned without farming across the country by landlords, we are still dependent on imports to fulfill the domestic demands for food grains, fruits and vegetables. The proposed act will pave the way for massive use of fallow land for commercial farming by making available the unused land on lease or contracts to interested farmers,” Pradip Maharjan, Chief Executive Officer of AIC, who is also a member of the drafting committee, told Republica on Wednesday. The act allows the government and private land owners to give their lands on lease or contract for farming. Existing laws don´t cover the contract or lease farming which has made land owners reluctant to allow others to cultivate their land fearing tenancy by tillers. The proposed act also will make clear provision of insurance on farm products such as crops and animals with incentives to insurance companies which sell insurance policies for all kinds of farming system including contract or lease farming. “This proposed act envisions the certain privileges to insurance companies that will sell their insurance policies for the insurance for cattle and crops. We have proposed that companies that paid compensation against loss of farm properties under such insurance scheme, can deduct the amount from their income before tax,” said Maharjan. At a time when there is nominal market access for farm products, the the act has also attempted to encourage opening up agriculture markets in the land provided in lease and contract. “We have also suggested in the draft that the government encourage banks to issue loan to the entrepreneurs for agro-based market,” he added. He said the proposed act will transform absent landlordism, a trend in which real land lords don´t cultivate by staying away from their own land, into commercialization of farming with the involvement of farmers other than landowners. “As per our rough calculation around 20 percent of land in the terai of mid-Western and Far-Western region has been left fallow by land owners. The proposed act will prove to be instrumental for proper utilization of such land for farm commercialization which will ultimately resolves the problems of unemployment and food insecurity,” he added."

Pvt sector calls for apt farm policy | National | Business | ekantipur.com

Pvt sector calls for apt farm policy | National | Business | ekantipur.com

Taking m-commerce to the next level | National | Business | ekantipur.com

Taking m-commerce to the next level | National | Business | ekantipur.com

Company I am following in Financial Inclusion.... 

Nepali Banks and venture funds will complement each another ....

VCs are no competition threat to existing banks .. they complement each another .................VCs can use banks for deal origination and to provide there investee companies with  working capital loan .....

Reasons how VCs will help Banks......

• Help prop up bad loans 
• VCs have hands on management in their  investee companies,therefore will  help bank to reduce write-off risks...

Source: Dalberg research and analysis

Government of Nepal + Private sector development policy and entrepreneurship

So ..so ...  finally after 20 years of economic liberalization,Nepali government has realize that existing policy for private sector development sucks and it need to be revamped ....The Government has started consultation with    private sector umbrella bodies (FNCCI &CNI) to brain storm on ideas  on what kind of private sector development policy will create long term sustainable economic growth...Employment data from early 1990s to 2010 suggests that it is  not the large scale  industries that help create more jobs and social harmony , but it the SMEs ......... If government objective is to create a sustainable economy  than development of entrepreneurial eco- system  and growth in SMEs should be the focus of  the new private sector development policy.............................

Here are two suggestion for the Nepali government

Suggestion one from Nation Planning Commission-India 

Suggestion two from Steve Blank's article - Why Governments Don’t Get Startups

"Not understanding and agreeing what “Entrepreneur” and “Startup” mean can sink an entire country’s entrepreneurial ecosystem." Click here to read more 

Landscape of social entrepreneurship in Nepal

Here is a summary of  challenges faced by social entrepreneurs in India.I think Nepali social enterprises are also facing similar challenges

  

Barriers	Challenges	Some Solutions
Access to finance	Refers to the financial barriers related to the lack of equity, debt, and working capital for start-up social enterprises and non financial barriers, such as a lack of financial literacy.	-provision of Blended Capital (mix of equity and grant funding) -Angel financing or royalty -based debt - awareness among HNIs on the potential to invest in social enterprises
Access to Talent	Lack of finance to pay market rate salaries is the main cause of this challenge, with the consequence that these businesses are unable to hire or retain qualified and experienced staff.	- Fellowship programs exist to provide emerging talent for impact investors. - Grant funded training programs for employees of social enterprises. - Provision of shared professionals between social enterprises is a potential solution but one that has yet to be implemented.
Scaling Up	Many enterprises fail to scale due to a range of factors including complex legal structures, a lack of state government support and an absence of basic infrastructure.	- Policy studies supported by donor agencies and investors to establish the business case for an innovative inclusive business model in a specific industry. - Collaborative partnerships between social enterprises and third parties that have 'made the last mile linkage' to access consumers.
Regional Inclusiveness	There is a clustering of impact investments in a few geographies as indicated through this research.	- Develop regional specific investment funds. - Establish regional social innovation think tanks and incubators.
Sourcing and Pipeline	The challenge is how to source genuine social enterprises that are located outside the metros at an affordable cost.	- Commission knowledge sharing and policy papers on context specific operating models, and local conditions that drive the ways products and services are distributed and sold in specific Indian States.
Capacity Building and Training Solutions	Social enterprises require significant capacity building and training to attain the education, skills, and access to information in order to execute their business plan.	- Mentoring for building capacity of entrepreneurs. - Expansion of existing or creation of new social enterprise incubators in new geographies replicating models such as Unltd, Dasra and Intellecap
Impact Measurement Transparency and Reporting	The difficultly in measuring impact and an absence in the standardization of impact measurement and third-party assurance of reporting are all industry challenges.	- Creating an India specific platform detailing basic profile information of all the impact investors and incubators operating in the country. - Policy development in partnership with asset owners on their reporting requirements
Ecosystem Coordination, Policy and Regulation	Regulatory issues include the lack of a legal structure for social enterprises, restrictive laws on foreign capital flows, equity investment regulations, and restrictions on blended capital.	- Research policy papers on ssues for social enterprise ecosystem to advocate for change.
Investment Exits	The lack of investments that have resulted in exists, was cited as the most significant to industry growth in a survey by JP Morgan and GIIN.	- Policy studies on other impact investment markets to analyze different models that investors have exited. - Creation of a database of impact investment exits in the Indian market

Source: Enablers for Change -A Market Landscape of the Indian Social Enterprise Ecosystem," September 2012, Prepared for GIZ by Ernst and Young Pvt. Ltd.

Deals/News I followed in Sept-2012

1. Mobile Banking- Nimbus,Finaccess join hands to provide banking to unbanked.click here to read
2. Agribusiness- IFC helps poultry farmers 
3. Hydro power- SN power donwn size Nepali operation 
4. Manufacturing-  Kansai Nerolac Paints is in the process of finalizing its 68% stake in one of the leading paint manufacturers in Nepal, Nepal Shalimar
   http://articles.economictimes.indiatimes.com/2012-06-20/news/32335726_1_hm-bharuka-kansai-nerolac-paints-knpl

   
   

   
   

MEGA BANK Nepal + SMEs + Securitization of Remittances

• Mega Bank, a class A commercial bank in Nepal announced last month that it is going to observe 'SME Bank Year' this current fiscal year. According to the CEO of the Bank - they plan to lend Rs 2.5 billion to SMEs by the end of this fiscal year............ 
  In an interview the CEO of  the bank said - "Remittance — the country’s economic lifeline — should be linked to SMEs"  .. Mobilizing remittances into SMEs will support sustainble economic growth of the country  
  

  
  

  So  here is an idea on how to link SMEs to Remittances ...............we can learn that from Sri Lanka 

  
  
  • "   IFC is using  unique model to help Sri Lanka's Commercial Bank of Ceylon mobilize long-term financing through the securitization of remittances and export proceeds it receives to boost the bank’s SME portfolio.......Worker remittances are systematically important for Commercial Bank.......    Under the terms of IFC’s latest financing of the bank for $65 million, future foreign receipts received by the bank from migrant worker clients will be securitized offshore, enabling Commercial Bank to obtain longer-term funding at a competitive price to boost its SME portfolio."    click here to read more      
                                    

Is Impact Investing creating more inequality in developing countries ?

I think current state of impact investing is creating more income inequality in developing  country like Nepal........My conclusion was influenced by two things I read over the weekend

• Why Nations Fail- the main thesis of the book is that some Nations are poor because  institutions are   "Extractive," serving only a small elite that takes income from everyone else.
• Government of Nepal hikes  minimum  foreign direct investment  to USD 55K

.............................................................................................................................................................
Last time I checked, the objective of impact investment was to invest in scale-able social enterprises and  SMEs. But if you  look at ground reality things are completely different. To ensure there fund economics work,impact investors both social first or finance first  funds tend to  investment in  companies that can take large amount of capital (large in terms of Nepali context,a company with a fixed asset of more than $130K is defined  as large scale company) . These capital  seeking companies usually fall under some big business house's conglomerate..........................................................................

What it takes to build an entrepreneurial ecosystem

Here is an excellent report from India's Planning Commission  on  strategies to create  vibrant  entrepreneurial eco-system .....Must read for our policy makers and advisers....

 Click here to read this report 

Exit Strategis for private equity/venture Funds in Nepal

I often get asked what are the different exit options  for private equity/venture fund  operating in Nepal since the IPO  route will be a tough sell. .................In a recent interview,Head of Leopard Capital  nicely explained various exit options for PEs  in countries similar to Nepal

1. Front Running Liquidity "We use different strategies. There’s no cookie cutter approach. One thing we look at is the unusual interest that multi-nationals have in accessing new emerging markets like Cambodia, where there’s still not a lot of brand awareness yet. The population is very young, so it is a tantalizing market to multi-nationals whose home countries are stagnating.Pioneer investors like Leopard can front-run the multi-nationals by creating new businesses they will want to acquire later.."
2.  CASH FLOW Trick "A second one is using the business’ cash flow to provide our returns, usually through high-yield debt, enhanced with an equity kicker so that we get both a fixed return plus a variable return based on performance.That structure works best when the cash flow is predictable, usually not in a startup unless there’s a contract in place providing visibility into the cash flow generation." 
3. "A third strategy is investing in companies just before they go public. Here the best approach is to take a small stake in a large company so that you are not subject to a lockup period."  ( In Nepal this strategy could work for hydro and tourism) 
4. "Our fourth strategy is to sell our position back to the company’s promoters or co-investors. In some cases owners may want us in their company for a period of time while they are scaling up. So we can sometimes negotiate put options or pre-planned sales back to our co-investors."  Source:http://leopardcapital.blogspot.com/2012/01/cambodia-new-emerging-market.html