KATHMANDU, April 23: Seven companies have announced plans to issue initial public offerings (IPOs) through the book building method.
The companies include Yeti Brewery Limited, Nepal Tea Development Corporation Limited, Norvic International Hospital and Medical College Limited, Jagdamba Spinning Mills Limited, Times Pharmaceuticals Limited, Laxmi Steels Limited, and Purbanchal Lube Oil Limited. According to the Nepal Stock Exchange (NEPSE), it has partnered with these firms to facilitate their public listings via the book building method.
The book building method determines the IPO price based on market demand from qualified institutional investors, rather than a fixed par value of Rs 100 per share. The process is governed by the ‘Book Building Guidelines, 2020.’
24 companies preparing to issue IPOs worth Rs 6.5 billion
Qualified institutional investors—such as mutual funds, insurance companies, and merchant bankers—play a key role in setting a sustainable price floor and ceiling. Through competitive bidding, they help ensure that shares are neither undervalued nor overinflated at the time of public launch.
Under the Securities Board of Nepal’s directive, a company must have been profitable for three consecutive years to issue an IPO via book building method. Additionally, the IPO issuance must be approved by the company’s general meeting, and the net worth per share must be at least 50 percent of the paid-up capital.
Under the book building method, 40 percent of the issued shares are sold to qualified institutional investors at a premium rate, while the remaining 60 percent is allocated to the general public.
A few months ago, however, the book building IPO of Reliance Spinning Mills sparked controversy over allegations of financial manipulation. The company was accused of inflating profits to set an artificially high share price of Rs 820.80. The controversy led regulators to probe the pricing process.
