Glossary of Terms
Every field has its own shorthand, and NEPSE investing is no exception. This page collects the recurring terms, acronyms, and Nepal-specific words used across the book's 118 chapters, defined in plain English, with a link back to the chapter where each one is explained in full. Use it the way you would a dictionary at the back of a textbook — not to replace the chapters, but to look something up quickly when you meet it again in a later one.
A
ADV — Average Daily Volume
The average number of shares of a company that actually change hands in a day. On NEPSE, many listed companies trade so few shares a day that a large order can move the price sharply, or fail to fill at all for days. Think of it like asking for a taxi in a village versus in central Kathmandu — in the village, there may only be one or two taxis a day, so a sudden group of five people wanting a ride all at once is a real problem, even though the same request would be trivial in the city.
AGM — Annual General Meeting
The yearly shareholders’ meeting at which a company presents its audited results, and at which dividends and bonus shares are formally approved. For an ordinary NEPSE investor the AGM date matters for a practical reason: the book closure that goes with it determines who is on the register, and therefore who actually receives the dividend or bonus being announced.
Arba, Kharba, Lakh, Crore
Nepal's own units for writing large numbers, used everywhere in this book's figures instead of "million" or "billion." One lakh is 100,000. One crore is 10 million (100 lakh). One arba is 1 billion (100 crore). One kharba is 100 billion (100 arba). A company's annual profit reported as "arba 2.4" means NPR 2.4 billion.
→ Chapter 99 — see these units used in a complete worked memo
ASBA — Application Supported by Blocked Amount
The system every NEPSE IPO, FPO and rights application now runs through. Rather than debiting your money when you apply, your bank blocks the application amount in your own account; it is released if you are not allotted, and only debited if you are. This is why you must have the full amount as available balance before applying, not on the day results are announced.
Asset Quality Ratios
A family of ratios that measure how healthy a company's assets are — for a bank, mainly how many of its loans are actually being repaid on time.
→ Chapter 41 — Asset Quality, Capital, Solvency & Efficiency Ratios
B
BOID — Beneficial Owner Identification
The unique number that identifies your DEMAT account in CDSC’s records. It is the identity your shares are actually held against, and CDSC enforces one IPO application per BOID per issue — a second attempt from the same BOID is rejected as a duplicate.
Bonus Share
New shares a company gives existing shareholders for free, funded from its own reserves rather than fresh cash — the corporate equivalent of a shopkeeper giving you two extra sacks of rice from the storeroom instead of a cash discount. It grows the number of shares you hold, but it does not by itself grow the value of the underlying business.
Book Value / Net Asset Value (NAV)
What a company would be worth on paper if you added up everything it owns and subtracted everything it owes, then divided by the number of shares. It is a starting point for valuation, not a finish line — a bank's book value and a hydropower plant's book value mean very different things.
Borrower Overlap
A risk specific to microfinance, where the same low-income borrower has taken loans from several different microfinance institutions at once, often without any one lender knowing about the others. It's the equivalent of a household borrowing from three separate cooperatives in the same village to cover the same shortfall — each lender thinks the borrower's debt load looks manageable, because none of them can see the whole picture.
C
Canon Score
This book's own 100-point scoring system for grading the quality of a NEPSE-listed company across seven dimensions — never a prediction of where its share price is headed, and never a substitute for checking whether today's price is a fair one to pay.
CAR — Capital Adequacy Ratio
How much of its own capital cushion a bank holds against its loans, expressed as a percentage. Regulators set a minimum CAR so that a bank has a buffer to absorb losses before depositors are ever at risk — similar to how a bus is required to carry a spare tyre, not because it will definitely be needed today, but because the cost of being caught without one is severe.
CASA — Current Account and Savings Account Ratio
The share of a bank's total deposits that sit in current and savings accounts, which pay little or no interest, rather than in fixed deposits, which pay more. A higher CASA ratio generally means cheaper funding for the bank.
CD Ratio — Credit-to-Deposit Ratio
How much of the money a bank has taken in as deposits it has lent back out as loans. A very high CD ratio across the banking system is one of the clearest early signs of a tightening liquidity cycle in Nepal — banks start competing harder for deposits and lending slows.
CDSC — CDS and Clearing Limited
The central depository that holds every NEPSE-listed share in electronic form, runs the MeroShare portal, and clears and settles trades on a T+2 cycle. If NEPSE is the marketplace where a price is agreed, CDSC is the registry that actually moves the shares and the money afterwards.
Circuit (Upper and Lower Circuit)
The daily limit on how far a NEPSE share price is allowed to move, up or down, before trading in it is paused for the day. A share that has hit its upper circuit cannot be bought at a higher price that day, no matter how many people want to buy it — and one at its lower circuit cannot be sold at a lower price, no matter how many people want out.
COD — Commercial Operation Date
The date a hydropower project stops being a construction site and starts selling electricity under its PPA. It is the single most important date in a hydropower investment case: revenue begins, the construction-period moratorium ends, and loan repayment starts. A delayed COD pushes revenue back while interest keeps accruing.
D
DCF — Discounted Cash Flow
A valuation method that estimates what a company is worth today by projecting the cash it will generate in future years and converting those future rupees into today's rupees, since a rupee received five years from now is worth less than a rupee in hand today.
DDM — Dividend Discount Model
A valuation method built specifically around the dividends a company is expected to pay, rather than its total cash flow — useful for steady dividend-payers like many Nepali banks and utilities.
Debenture
A listed corporate bond — a loan to a company that pays a fixed interest rate (the coupon) and returns the principal at maturity. Debentures sit above shares in the repayment queue if the company fails, which makes them lower-risk and lower-return than the same company’s equity.
DEMAT Account
The electronic account that holds your shares in digital form, the way a bank account holds your money in digital form instead of as physical cash. You cannot buy or hold NEPSE-listed shares without one.
Distributable Profit
The portion of a company's profit that is legally available to be paid out as dividends, after setting aside required reserves. A company can report a healthy profit on paper while still having very little distributable profit, if most of it must legally stay locked in reserves.
Drawdown
How far your portfolio has fallen from its highest recent value, usually shown as a percentage. A 30 percent drawdown means your portfolio is currently worth 30 percent less than its recent peak, whatever the reason.
E
EDIS — Electronic Delivery Instruction Slip
The electronic approval a seller must give through MeroShare to release sold shares from their DEMAT account. Forgetting it is one of the most common and most expensive retail mistakes on NEPSE: the trade is agreed but settlement fails, and the seller pays a penalty.
F
FPO — Further Public Offering
A sale of new shares by a company that is already listed on NEPSE, as opposed to an IPO, which is a company's very first sale of shares to the public.
Free Float
The portion of a company's shares that are actually available to trade in the open market, excluding shares locked up with promoters and other insiders. A company can have a large total share count but a tiny free float, which means far fewer shares are genuinely available to buy than the headline number suggests.
G
Governance Override
A rule inside the Canon Score stating that if a company's Governance & Promoter Behaviour sub-score falls low enough, the company's overall score is capped in the weakest band, no matter how strong its other six dimensions look. The idea is simple: strong financial numbers built on top of untrustworthy management are not actually strong.
Governance Scoring
The specific method used to grade a company's governance and promoter behaviour before that grade feeds into the Canon Score's Hemisphere 1.
H
Hemispheres (Two Hemispheres)
The Canon Score's two-sided structure: a 40-point Hemisphere 1 that asks whether you can trust and actually trade a company, and a 60-point Hemisphere 2 that reads its financial statements. Every company is judged from both angles before the two sides are added into one 100-point score.
I
Insider Trading
Buying or selling shares based on non-public information not available to ordinary investors — for instance, a promoter selling shares just before disappointing results are announced publicly.
→ Chapter 21 — Insider Trading and Information Asymmetry in Nepal
IPO — Initial Public Offering
A company's very first sale of its shares to the public, the moment it moves from being privately held to being listed and traded on NEPSE.
L
Liquidity Regime
The general state of how easily money is flowing through Nepal's banking system at a given time — loose, when deposits are abundant and credit is easy to get, or tight, when banks are short of loanable funds and lending slows. NEPSE tends to move with these regimes, sometimes more than it moves with company earnings.
→ Chapter 0.3 — Liquidity Regimes in Nepal: The Four-Phase Framework
Loan Recycling
A microfinance-specific warning sign where a borrower takes a new loan mainly to repay an old one, rather than because the underlying activity the loan was meant to fund is generating real income. It can make a lender's repayment records look clean even when the borrower is quietly sinking deeper into debt.
Lock-in Period
A period after listing during which certain shares — typically promoter holdings and some allotments — cannot legally be sold. Lock-in expiry matters because a stock that looks thinly traded can suddenly face a wave of newly sellable shares, and hydropower listings in particular have staggered expiries running years past the initial listing.
M
MeroShare
CDSC’s investor-facing web portal and app. It is where a retail investor applies for IPOs, FPOs and rights, approves EDIS when selling, and views their holdings and corporate actions. It is not a trading platform — buy and sell orders go through a broker’s TMS.
Model Drift
What happens when a scoring model that worked well in the past starts giving less reliable answers over time, because the market or the sector it was built for has changed underneath it. Catching drift early is what keeps a scoring system trustworthy for years rather than just for the year it was built.
Mutual Fund
A pooled investment scheme that holds a portfolio of shares on behalf of many unit-holders, managed by a licensed fund manager. Closed-end schemes list and trade on NEPSE like a share, at a price that can drift away from the underlying net asset value per unit.
N
NEPSE
The Nepal Stock Exchange — the single exchange where all of Nepal's listed companies trade. Unlike stock markets with dozens of exchanges to choose from, NEPSE is Nepal's one and only venue, which shapes almost everything else about how the market behaves.
NIM — Net Interest Margin
The difference between what a bank earns on the loans it makes and what it pays out on the deposits it takes in, expressed as a percentage of its lending assets. It is, in effect, a bank's core profit margin on its main business of lending.
NPL — Non-Performing Loan (ratio)
The share of a bank's total loans where the borrower has stopped repaying on schedule. A rising NPL ratio is one of the clearest warning signs that a bank's loan book is turning sour.
NRB — Nepal Rastra Bank
Nepal's central bank, the institution that sets monetary policy, regulates commercial banks, and manages the country's currency and foreign exchange reserves. Its policy decisions ripple down into NEPSE through the credit cycle described throughout Part I of this book.
P
P/E and P/B — Price-to-Earnings and Price-to-Book
The two valuation ratios used most often in this book. P/E compares a share’s price to the profit it earns per share; P/B compares it to the net asset value behind each share. Both are only meaningful against a comparable peer group and the company’s own history — a low P/E on collapsing earnings is not cheap.
Payout Ratio
The share of a company's distributable profit that it actually pays out as dividends, rather than retaining. A payout ratio near 100 percent means the company is returning almost everything it can to shareholders; a low one means it is reinvesting most of its profit back into the business.
PPA — Power Purchase Agreement
The long-term contract that fixes the price at which a hydropower company will sell its electricity, usually to the Nepal Electricity Authority. It is the single most important document for valuing a hydropower stock, since it locks in the revenue side of the business for years in advance.
Promoter Share
Shares held by a company's founders and controlling insiders, as distinct from shares held by the general public. Promoter behaviour — how they treat minority shareholders, whether they pledge their shares as loan collateral, whether they engage in related-party dealings — is one of the most important and most overlooked risks in NEPSE investing.
Provisioning Coverage
How much money a lender has set aside, in advance, to absorb loans it expects will never be repaid. Higher provisioning coverage against a given level of bad loans generally means a more conservative, better-cushioned lender.
R
Red Flags
Specific warning signs in a company's financial statements — unusual jumps in receivables, related-party transactions, frequent changes of auditor — that suggest the numbers deserve closer scrutiny before you trust them.
Rights Issue
An offer giving existing shareholders the right to buy new shares, usually at a discounted price, in proportion to what they already hold. Unlike a bonus share, it requires you to put in fresh cash to receive the new shares.
ROE and ROA — Return on Equity and Return on Assets
The core profitability ratios. ROE measures profit against shareholders’ equity — how hard the owners’ capital is working — while ROA measures it against total assets. For Nepali banks in particular the two diverge sharply, because leverage inflates ROE without improving ROA.
S
SEBON — Securities Board of Nepal
Nepal's securities regulator, the body responsible for overseeing NEPSE, licensing brokers and merchant bankers, and approving new share issuances like IPOs and rights issues.
→ Chapter 8 — Regulatory Architecture of the Nepal Capital Market
Sector Ceiling
A hard limit on how much of a portfolio can sit in any one sector — banking, hydropower, or otherwise — regardless of how attractive an individual company's Canon Score looks. It exists specifically so that one sector's boom, or one sector's crash, cannot single-handedly decide a portfolio's fate.
T
TMS — Trading Management System
The broker-side platform through which buy and sell orders actually reach NEPSE. Each SEBON-licensed broker runs its own TMS instance, and it is separate from MeroShare: orders go through TMS, while applications, EDIS approvals and holdings live in MeroShare.
V
Valuation Reasonableness
One of the Canon Score's seven dimensions — a check on whether today's NEPSE price already reflects, or overreflects, the quality the other six dimensions describe. A company can score well on every other dimension and still be a poor investment today, if its price has already run far ahead of that quality.
X
XIRR — Extended Internal Rate of Return
The money-weighted return calculation that accounts for deposits and withdrawals made on irregular dates. It is the honest way to measure a real Nepali portfolio, where rights calls, IPO allotments and ad-hoc deposits mean a simple start-to-finish percentage badly overstates performance.
Not Sure Where to Start?
- New to NEPSE entirely? Begin with NEPSE, DEMAT Account, and SEBON.
- Scoring your first company? Start with Canon Score, Hemispheres, and Governance Override.
- Reading a bank's numbers? Look up CAR, NPL, NIM, and CASA together.
- Evaluating a hydropower stock? Look up PPA alongside Chapter 43's model.