Auction (lilami) shares on NEPSE: how unclaimed rights get sold, and whether bidding is worth it

A friend rang from outside a capital company office in Naxal, holding a Rs 100 form and a question. Himalayan Power Partner was auctioning off the right shares nobody had taken up, and he wanted to know what number to write in the box. The stock was trading around Rs 369. Bid too low and you get nothing back but your own money, three days later. Bid too high and you have paid retail for something you queued for.

He wrote Rs 350. The cut-off came in at Rs 345.10. He got the shares by five rupees.

What actually gets auctioned, and one thing that does not

Three different things in the Nepali market get called lilami, and they are not the same event.

Unsubscribed right shares. This is the ordinary case and the one worth your attention. A company announces a rights issue, the subscription window runs at least 35 days under Rule 18(1) of the 2073 Regulations (extendable by up to 15 more), and whatever shareholders fail to take up has to be sold. Rule 20 of the Securities Registration and Issuance Regulations 2073 puts it plainly: shares remaining unsold within the open period must be sold by publishing a public notice and adopting the auction process.

Promoter shares. Sometimes the unsubscribed portion of the promoter group's rights goes to auction alongside the public tranche, which Section 15(3)(ka) of the Directive requires to happen in one simultaneous sale. Sometimes a promoter is simply selling out, or a state body is divesting. Nepal Rastra Bank once auctioned 3,23,525 units of RMDC Laghubitta promoter shares at a Rs 261 minimum. Promoter shares in a bank or insurer come with regulator strings: a buyer has to clear NRB's Fit and Proper Test, though promoters holding 2% or less no longer need to inform NRB to buy or sell. These trade in the promoter segment afterwards, under a separate ticker. HIDCL's auctioned promoter shares list as HIDCLP.

Pledged shares, which are not auctioned at all. This is the belief worth correcting, because it sends people looking for an auction that never happens. When a margin position goes bad in Nepal, nobody publishes a lilami notice. SEBON's Margin Trading Facility Directive 2082 says that if the investor fails to maintain margin, the broker may sell the shares bought under the facility. Sells them on NEPSE, at market, using the power of attorney it holds over your margin demat account. The force-sell math and the 20% maintenance threshold are covered in the margin lending post. Banks do publish collateral auction notices under the Bank and Financial Institution Act 2073, but those cover land, houses and vehicles. Demat shares get liquidated through a broker.

One more terminology trap. "Unclaimed right shares" means unsubscribed rights heading to auction. It has nothing to do with shares an owner forgot about. Nepal has a statutory mechanism for unclaimed dividends, where Section 182(9) of the Companies Act 2063 moves money to the Investor Protection Fund after five years. No equivalent mechanism auctions off a dormant shareholder's actual shares.

The floor is Rs 100, and that tells you almost nothing

Section 15 of SEBON's Securities Issuance and Allotment Directive 2074, now running through its tenth amendment effective 2082.08.04, sets out the whole procedure. The clause people misread is 15(3)(kha): bidding is conducted on the face value. So every auction notice says minimum Rs 100, and every year somebody bids Rs 101 on a stock trading at Rs 400 and wonders why they got nothing.

The floor is a starting line, not a price signal. What sets the price is the other envelopes.

The rest of Section 15 is the part worth knowing before you plan around a deadline:

Allotment runs from the highest bid downward until the shares run out. The price of the last share allotted becomes the cut-off, everyone at or above it gets shares, and where several applicants sit exactly at the cut-off, the shares at that price are split pro-rata. Anyone below the cut-off gets a refund and nothing else. You are not bidding against the company. You are bidding against roughly two thousand other people who also read the notice.

What four recent auctions actually cleared at

The numbers matter more than the theory here, so here is what the last two years produced. Cut-off and last traded price are from ShareSansar's reporting on each bid opening; the discount column is my arithmetic on those two figures.

A consistent single-digit-to-low-teens discount, and it has been narrowing. That is the honest case for bidding: a few percent off, no broker commission on the way in, and no queue-jumping lottery like IPO allotment.

Now the case against, from the same data set. At NLG, the highest bid received was Rs 1,131 against a Rs 1,100 last traded price. Someone paid a premium for shares they could have bought on the open floor that morning. Every cut-off above was also published as tentative, with the standard line that it may vary once all cheques are reconciled and cleared, so you do not actually know your clearing price on the day bids are opened.

The folk heuristic circulating on Nepali share forums is to bid 80% to 90% of the last traded price and accept that you will miss some. It is blog-tier advice rather than regulation, but the four cut-offs above all landed inside that band, which is at least consistent.

The minimum bid quantity is where retail gets shut out

This is the clause that decides whether an auction is open to you at all, and it is set per auction rather than by any general rule.

Ordinary tranches have been settling on 100 units as the minimum. At the HPPL cut-off that is about Rs 34,500 blocked; at NLG's, about Rs 95,100. Promoter tranches run higher, commonly 1,000 units, and institutional sales higher still. Nepal Investment Mega Bank's 2025 promoter auction set the minimum at 1,25,000 units.

The extreme case is worth remembering because it shows how a number in a notice can void an entire sale. In 2021 HIDCL auctioned 3,30,00,000 promoter right shares with a minimum bid quantity of one crore units. The promoter tranche received zero applications while the ordinary tranche, minimum 100 units, cleared at Rs 225. Three years later the same block came back with the minimum lowered to 100 units, drew roughly 2,500 applicants, and cleared at Rs 136.

Read the minimum quantity before the minimum price. It is the number that tells you whether the auction was designed with you in mind.

How to bid, and what it costs

Still entirely physical as of mid-2026. You cannot bid from MeroShare or any online channel.

1. Find the notice. ShareSansar runs a dedicated auction page split into ordinary and promoter tabs; Merolagani's announcements list carries them too. SEBON publishes the right-share pipeline upstream, which tells you what is coming before it reaches auction.
2. Collect the form at the issue manager's office. Costs Rs 100. The managers that recur are Global IME Capital, Muktinath Capital, Laxmi Sunrise Capital, Prabhu Capital and Siddhartha Capital.
3. Assemble the envelope: the form, a citizenship copy, a photo, your demat and PAN details, and a bank deposit voucher or Good-for-Payment cheque.
4. Deposit the full bid amount. Not a percentage. Hundred units at Rs 500 means Rs 50,000 goes in with the application. Investopaper's walkthrough covers the counter mechanics.
5. Submit sealed, before the window closes. Bids are opened publicly at an announced venue and time.
6. Wait. Refunds to losing bidders must begin within three days. Money is typically tied up about fifteen days, against roughly four months for a full IPO cycle.

Buying costs you the Rs 100 form and nothing else. No broker commission, no SEBON fee, because you are buying from the company rather than trading on the exchange. Selling later is where the normal NEPSE trading costs apply: commission from 0.36% down to 0.24% by slab, the 0.015% SEBON fee, and Rs 25 DP charge.

On tax, nothing special happens because the shares came from an auction. Your winning bid becomes the acquisition cost and folds into the weighted average cost for that scrip, exactly as capital gains tax on shares handles any other buy. Under FY 2083/84 rates a resident individual pays 7.5% on gains for holdings over a year and 10% under, deducted at source by CDSC.

The lock-in question nobody has answered cleanly

Rule 38(1) of the 2073 Regulations freezes securities held by promoters and other non-public groups, including bonus and rights shares granted on them, for three years from the date of public allotment. Rule 39 requires the freeze to be recorded as a block at CDSC for dematerialised shares, so transfers are stopped automatically rather than by anyone's good behaviour.

What the rules do not say anywhere I could find: whether shares bought at auction inherit whatever remains of that lock-in. City Hotel's November 2025 sale is suggestive, because it ran three separate tranches, and the 19,80,999 units explicitly labelled lock-in promoter shares cleared at Rs 276 while the ordinary units cleared at Rs 467. A gap that wide looks like the market pricing in a freeze. That is inference, though, not a rule, and no SEBON circular or CDSC statement I could locate settles it. Before bidding on a tranche described as locked in, ask the issue manager in writing when it unlocks.

Where this is heading

SEBON is introducing a right renounce system in FY 2083/84, letting shareholders sell their rights entitlement on the secondary market instead of letting it lapse. If it works as intended, fewer rights go unsubscribed and the pool reaching auction shrinks. A manual version already exists in Rule 19 of the 2073 Regulations, which lets a shareholder nominate their rights to one other person for a fee of 1% of the paid-up amount.

There is more rights issuance than there used to be, which is why auctions have become a regular feature. SEBON's Annual Report for FY 2081/82 records rights share approvals for 17 organised institutions totalling about Rs 15.41 billion, against 7 companies and Rs 7.64 billion the previous year, with the approvals going to six insurers and eleven hydropower companies. Those two sectors are where your auction notices will keep coming from.

What you actually need to know

1. The Rs 100 floor is legally required and practically meaningless. Section 15(3)(kha) of the 2074 Directive makes bidding start at par. What decides your fate is the cut-off other bidders set, which in four recent auctions sat 6.5% to 13.6% under the market price.
2. Check the minimum bid quantity before anything else. It is set per auction, and HIDCL's one-crore minimum in 2021 drew exactly zero bids. A hundred-unit minimum means retail was invited; a five-figure one means it was not.
3. Nobody auctions pledged shares in Nepal. A defaulted margin position is sold on the open market by your broker under the Margin Trading Facility Directive 2082. If you are searching for an auction notice with your own shares in it, you are searching for something that does not exist.

Sitting on an auction notice and unsure what to write in the box? Email parjanya57@gmail.com with the company, the floor, the minimum quantity and the current market price, and I'll walk the math with you.

This post is part of the Nepal Money Basics guide — the investing section.