The lock-in period in share market is when an investor cannot sell, transfer or otherwise dispose of his shares or other assets in a business or investment.
This time limit, which is usually set by a contract or legal requirement, is intended to encourage stability, prevent short-term trading, and align investor interests with the long-term performance of the company or investment.
Some industries such as hydro, investment, manufacturing and processing, and hotels are subject to a three-year lock-in period after allotment to the general public through an initial public offering (IPO) in Nepal.
For this lockout period, unit shares owned by project-affected locals and promoters are locked for hydro and manufacturing and processing.
Investments with no reservations in the initial public offering (IPO) process for locals and only the promoter's shareholding is locked in when it comes to the hotel sector.
Generally, shareholders are not allowed to sell or transfer their shares.
Lead promoters and early investors are required to hold their shares for three years after the IPO is distributed to the general public due to a permanent lock-in period.
This move ensures that key parties remain dedicated to the long-term growth and success of businesses listed on the Nepal Stock Exchange.
Notably, firms listed on the Nepal Stock Exchange will be able to pay dividends to shareholders from the first year of listing, keeping in mind the profitability of the business.
According to Nepal's regulatory bodies, the 3-year lock-in period with early dividend payment option successfully balances investors' interests while strengthening market stability.
The flexibility and integrity of Nepal's capital market are safeguarded by guaranteeing that primary promoters hold their shares at an early stage, thereby reducing the likelihood of quick share sales during difficult market conditions.
Lock-in in Period in Hydropower in Nepal
As per the regulations, the lock-in period for hydropower in Nepal is for 3 years of the allotment of IPOs.
Firstly, this lock-in period is effective for the local people who are affected by the hydropower project.
Secondly, the lock-in period of hydropower in Nepal is effective for the promoters of hydropower projects.
How do We Know the Lock-In Period of Stocks in Nepal?
There are various ways to know about the lock in period in share market in Nepal.
One of the various ways to know about the lock in period in Nepal is to know first the date of allotment of ipo.
To know the ipo allotment date, you can visit some websites such as sebon.com.np, nepsealpha.com, merolagani.com etc.
You can see the date of ipo listed from those websites as shown in the following images.
Very similar to this, we can also check the opening and closing date of IPOs in the past through the website of Nepsealpha as shown in this picture.
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| To know the lock-in period in nepsealpha.com website |
You can visit the nepsealpha's website to know the ipo closing date.
Frequently Asked Questions (FAQs) about Lock In Period in Share Market
What is Lock-in Period for shares?
Lock in period is the period when you can not sell the IPO shares of any companies. The lock in period for IPO shares of companies of particular sectors in Nepal is in general, three years.
What happens after lock-in period?
After lock-in period, the promoter shareholder and local affected people can sell their shares of companies. Then those all promoter shares changes into public shareholders.
What is the meaning of 3 years lock in period?
The meaning of 3 years lock in period in share market in Nepal is the shares of promoters and local affected people will be locked for 3 years.
Not of all sectors' promotor's shares but of some specific sectors such as hydropower sector, manufacturing and processing and the hotel will be in locked up.
What happens to a stock after lock up period?
After the lock up period, the following major thing happens to a stock.
- The promoter shares will be changed into public.
- Then the promoter share holders and the local affected prople can sell their shares.
- When they can sell the shared, obviously, it will increase the supply of shares in share market.
- Increasing of supply can decease the price of that particular stock in the market.
- The previous public shareholder which are also called ordinary share holders can lose their money invested in the share of that stock.
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