IMAGE VIA SHUTTERSTOCK
IN 2024 private-equity and venture-capital funds in Nepal deployed $64m. That is nearly 40% of all the capital invested in the previous 12 years combined. Forty deals closed. Nine funds were active, three of them for the first time. The special investment fund regime introduced in 2019 accounted for three-quarters of the total. That is not a lot of money in global terms. In Kathmandu it feels like a flood.
The numbers come from the Nepal Private Equity Association, which has tracked the industry since 2012. They suggest the market has crossed a threshold. The regulatory architecture works. The pipeline of companies has deepened. And the macro environment has aligned in ways that favour private capital. Banks are sitting on Rs7.7trn ($52.38bn) in deposits but lending at only 8.1%—less than half the deposit growth rate. The weighted average lending rate has fallen to 7.1%, from over 12% a few years ago. For growth-stage companies too small or too asset-light for commercial credit, private equity is the only game in town.
The remittance economy—Rs. 1.72trn a year, equivalent to $11.7bn—funds household consumption and drives demand across e-commerce, healthcare and digital payments. Government policy explicitly backs renewable energy, digital infrastructure and agricultural modernisation. Hydropower has attracted $55.2m in cumulative PE investment, the largest single sector, and cross-border power sales to India are now real. Solar, still in its infancy, is where hydro was a decade ago.
Yet the market has a problem. Of the 137 investments made since 2012, only 11 have been fully exited. Another eight have seen partial exits. That leaves 118 companies (86% of the portfolio) still sitting on fund managers’ books. This overhang is the industry’s biggest risk as well as its greatest opportunity. If exits materialise over the next five years, the resulting distributions will validate the asset class and catalyse a new fundraising cycle. If they do not limited partners will stay away.
The most obvious exit route is the Nepal Stock Exchange. Hydropower companies have listed for years, and retail investors consistently buy them. Manufacturing is now following: SEBON, the securities regulator, approved Palpa Cement, SY Panel Nepal and Shreenagar Agritech for IPOs in the past six months or so. But secondary-market liquidity is uneven and pre-IPO investors face lock-ups of six to twelve months. Staged disposals are wise.
Strategic sales to Indian companies confer a second path. Apollo, Fortis and Narayana Health have all explored Nepali healthcare entries. Indian cement and consumer-goods firms have acquired in Bangladesh and Sri Lanka; Nepal is the obvious next stop. A well-capitalised hospital or a fintech infrastructure provider with a captive banking clientele could be an acquisition. The trick is building relationships with potential buyers years before the exit, not months.
Secondary PE—one fund selling a stake to another—barely exists in Nepal. A dedicated secondary vehicle of $20m-30m would address the overhang from older vintages and provide price discovery. Energy project refinancings offer another partial exit: a fully operational hydro plant can be refinanced at 60-70% loan-to-value, returning equity without a full sale.
Sector opportunities are clearer than they have ever been. Healthcare has received just $11.1m cumulatively, absurdly low given Nepal’s infrastructure deficit and rising demand. A hospital chain in Kathmandu or Pokhara, capitalised for expansion, would be snapped up by an Indian group. Pharmaceuticals, at $2.1m, are similarly underinvested. Agri-business, at $8.2m with tiny average deal sizes, has massive potential in high-altitude specialty crops and export to India. The EV ecosystem—charging infrastructure, fleet management—is immature but real.
The constraints are likewise clear. Foreign limited partners remain spooked by capital-repatriation delays that can stretch to a year. Nepal’s company law lacks standard instruments like convertible notes and drag-along rights, forcing costly bespoke structures. Capital-gains tax makes no distinction between long-term and short-term holdings, deterring domestic institutions like insurers, which sit on Rs676bn in bank deposits earning sub-PE returns.
The next $64m will go into a better market than the first one did. But the exit question is urgent. If the 118 unrealised investments do not find liquidity, the industry will stall. If they do, the 2026-30 cycle could bring $200m-500m of fresh capital. The money is there. The question is whether Nepal will let it leave. ■
