Factors Driving Private Equity Financing of Entrepreneurship in Nepal: Exploring Differences in Priority Sectors of Economy

This study was conducted with an objective to study the factors affecting the investment decision of investment firms in entrepreneurial financing across priority sectors of Nepalese economy. The priority sectors under study were energy, manufacturing, tourism, agriculture, and service. The primary data for the study was collected through questionnaire survey with thirty personnel representing different investment firms. Among these five sectors, energy and service sectors were most prioritized by private equity investment firms while rest three were found less attractive. The largest investor for service sector were high net worth individuals (HNIs) while for energy sector were retail and institutional investors. However, no difference was found in the investment decision across investment stages in these sectors. Although the expected return from investment was greater for the service sector, the average ticket size for energy sector was higher than that of the service sector. The firms investing in service sector preferred to exit by public market sale and secondary sale, while firms investing in the energy sector preferred to exit by public market sale and buy back. Further firms investing in the service sector gave more priority to management quality while firms investing in the energy sector gave higher priority to management quality and environmental, social and governance (ESG) considerations. In both cases, financial considerations were given less priority. Addressing new regulatory requirements and finding new investment opportunities were respectively found to be the first and second most important challenges in operating private equity funds for private equity firms in Nepal.