KATHMANDU, Nov 23: Sarbottam Cement on Wednesday issued its primary shares through the book building process. This is the first time that a Nepali company has floated its initial public offerings (IPOs) at the book building price.
Issuing a public notice, the company said it has opened its IPOs for institutional investors giving a deadline of November 26 at the latest. The company has maintained a cut-off price of Rs 401 per unit and a ceiling of Rs 601.50 per unit.
The company received approval from the Securities Board of Nepal (Sebon) to float 12.9033 percent of its issued capital of Rs 4.65 billion. Out of the proposed six million units of its primary shares, the company has floated 2.4 million units of its IPOs at the book building price in the first stage.
Book building is the process by which an underwriter attempts to determine the price of a company’s IPOs. An underwriter, usually an investment bank, builds a book by inviting institutional investors such as merchant banks, mutual funds, listed companies, security traders and other entities recognized by the Sebon to submit bids for the number of shares and the prices they would be willing to pay for them.
Through enforcing Book Building Bylaws 2020, the Sebon has allowed the mechanism for interested companies to float ordinary shares for both institutional and general investors. According to the Sebon, a company operating at a profit for at least the past three years and with a net worth of 150 percent of the per share capital is eligible to issue IPOs in book building price.
In addition, the company must have received at least the average credit rating from authorized agencies. The company concerned should take approval from its annual general meeting to issue IPOs through this process.
Under this rule, a public institution willing to float its ordinary shares in an IPO will first need to fix a base rate of the stock after having a detailed consultation with interested institutional investors. The price range can then be determined within 20 percent of the upper and lower limit of the base rate. The interested institutional investors are then asked to submit their bids with the bid amount not exceeding 20 percent of the upper limit mark.
Three years ago, Sarbottam Cement was dragged into a controversy after the then SEBON Chairperson Bhisma Raj Dhungana and CEO of Nepal Stock Exchange Chandra Singh Saud were allegedly involved in insider trading, favoring their close relatives to purchase promoter shares of the cement manufacturer.
