Now, Sebon has said that it is ready to finalize the IPO mechanism under the book building method within two months. The board has recently given instructions to hold a meeting with Nepse and companies planning to issue IPO under book building, merchant bankers who are in charge of issuing shares, qualified institutional investors, and make necessary preparations.
Book building is the process by which an underwriter attempts to determine the price at which the IPO of a company is offered. An underwriter, normally an investment bank, builds a book by inviting institutional investors (such as fund managers and others) to submit bids for the number of shares and the price(s) they would be willing to pay for them. According to Sebon Chairman Ramesh Kumar Hamal, necessary discussions have been held with the stakeholders concerned to finalize the process. "We have asked everyone to complete the work to be done on their part in one and a half months," he said, " The board will finalize it within two months." The board issued guidelines related to book building in 2017. According to Sebon, there are some issues related to merchant banks and credit rating agencies. Hamal said the board has taken the necessary decisions to resolve the issues. The board has also instructed the companies that have planned their IPOs through the book-building IPO to adjust the previously determined share price. Sarbottam Cement and Reliance Spinning Mills had earlier applied at Sebon seeking permission to issue IPOs through book-building. Sarbottam has fixed a maximum price of Rs 751.50 per share while Reliance Spinning Mills has fixed a maximum price of Rs 912 per share. According to Sebon, Sarbottam has sought to issue 2.4 million shares at the price range of Rs 501-751.50. And, Reliance Spinning Mills has asked Sebon permission to issue 770,640 shares at the price range of Rs 608-912. As the regulator of the capital market, Sebon needs to make an evaluation of investor demand and give its okay to set the issue price before the company can float shares to the general public. As the price was determined more than eight months ago and the stock market has fallen significantly since then, the board has asked the companies including Sarbottam that are looking to issue shares through the book building method to adjust the share prices. Similarly, the board has instructed Nepse to proceed with the preparation of inviting tenders for the IPO sales through book building. The merchant bankers based on the Nepse tender should initiate the IPO issuance process.
