ILLUSTRATION: SHUTTERSTOCK
OF THE 137 private-equity and venture-capital investments recorded in Nepal between 2012 and 2024, exactly 11 have been fully exited. That is an 8% exit rate across a decade of activity. Measured against the brisk churn of London or Singapore deal-making, it looks damning, a market of patients in a waiting room with no doctor in sight. Look harder and the picture inverts.
Nepal’s private-equity industry, documented each year by the Nepal Private Equity Association, an industry body, deployed a record $64m in 2024 alone—roughly 37% of all capital committed in the market’s entire history, in a single twelve-month stretch. Nine funds made investments that year, three of them for the first time. The market is not stagnating: in fact it is accelerating. The exits are missing not because the investments have failed, but because almost none of them are old enough to exit yet.
Also read: How private capital flooded into Nepal—and got stuck
This matters because the global instinct, when confronted with illiquidity, is to reach for the panic button. It is usually the wrong instinct. In frontier markets—those early-stage economies where institutional infrastructure is being built—the holding period is not a problem to be solved. It is the strategy.
Private equity anywhere takes time. The standard wisdom puts the value-creation window at years four through seven, with exits concentrated in years seven through ten. Nepal’s oldest funds, many launched around 2015, are only now approaching that zone. The 118 investments sitting in portfolios unexited are works in progress.
The explanation becomes clearer when you look at the structure. Nepal’s stock exchange, the Nepal Stock Exchange, is dominated by financial-institutions shares and retail punters. A functioning secondary market for private stakes is absent; corporate acquirers hunting for targets are scarce; an IPO pipeline that a venture-backed tech firm could credibly tap has yet to take shape. Forcing an exit into that environment generates poor returns, meaning it concedes value. Patience, in this context, is simple maths rather than temperament.
Two sectors make this especially clear. Hydropower absorbs the single largest share of Nepal’s private investment capital—$55m cumulatively with average deal sizes near $23m. Nepal sits atop an estimated 83,000 megawatts of theoretical hydro potential, of which less than 3,500 megawatts has been developed. A power purchase agreement with the Nepal Electricity Authority, combined with grid construction and project commissioning timelines, makes these investments structurally 10-to-15-year propositions. The 2023 power trade accord with India, which opened a formal cross-border electricity market, gave those positions an exit logic that did not exist three years ago. Investors who left before that agreement landed would have sold at the wrong moment.
The technology sector shows this even more clearly. Rara Digi Labs, the Kathmandu-based fintech company, began life as nLocate, a location-services business, before pivoting in 2016. It spent two years building revenue before investing in products again, eventually launching Gokyo Reconciler in 2019, Tigg in 2020 and Myra in 2022. Avasar Equity made its investment in 2024, eight years after the founding. An investor demanding exit at year four would have departed before the company’s most valuable assets existed.
A regulatory quirk has, perhaps accidentally, enforced exactly the discipline the market needs. Funds licensed under Nepal’s Specialized Investment Fund framework, created under the Securities Act of 2019, now account for 74% of all capital deployed in the country. SIF licences operate for a fixed term (typically 5–15 years), with defined governance requirements. This is not a constraint on returns so much as a structural insulation against the short-termism that has periodically wrecked private markets elsewhere. The investors are, in a strict sense, legally required to be patient.
The counterarguments deserve honest treatment. Not every unrealised investment is a diamond in the rough. Nepal’s economy shrank during the pandemic, and some portfolio companies will not recover. The NPEA’s data is self-reported by member firms and cannot, for confidentiality reasons, disclose company-level figures—which means the 86% unrealised share almost certainly includes some troubled assets that are being described in softer accounting terms. Limited partners in older funds will eventually run out of patience regardless of market conditions, and fund managers who confuse paralysis with strategy will find that distinction difficult to defend at the next annual meeting.
But the bigger arc is becoming legible. Indian corporates, flush with capital and hungry for regional expansion, are increasingly scanning Nepal’s technology and financial-services companies as acquisition targets. Chinese firms connected to Belt and Road activity constitute a separate pool of potential buyers in energy and manufacturing. NEPSE itself is adding instruments. Discussions about an SME listing board have begun. The exits are not coming because the investors conjured them from hope; they are coming because the infrastructure to support them is being assembled.
In most of the world’s developed private-equity markets, the holding period is a choice. In Nepal it is partly a constraint and partly the entire point of being there. The difficulty of exit is the same difficulty that keeps less committed capital away, preserving the returns for those who stayed. Southeast Asia has been discovered by global funds. East Africa draws crowds. South Asia’s smaller frontier economies remain, for now, relatively uncongested. The investors sitting on 118 unrealised positions in Kathmandu arrived early, and are not stuck. In frontier investing that is the only advantage that cannot be bought. ■
