First Business News Portal in English from Nepal
KATHMANDU: The Securities Board of Nepal (SEBON)has received applications from a total of 58 institutional investors who have shown interest to issue IPOs through the book building method.
The board had on August 19 called for applications from eligible institutional investors to participate in the bidding process for the IPO issue through the book building system within 35 days as per the Book Building Directive 2020. In response, about five dozen organizations have filed their applications.
According to Rupesh KC, deputy executive director of SEBON, all the organizations that have applied will be given the permission within a year.
The applicants include listed merchant bankers, mutual fund schemes and other companies. After the applications are approved by the board, these institutional investors will be able to participate in the process of public issuance of shares through book building system.
The regulator implemented the book building system to encourage those companies who do not want to issue ordinary shares at figurative cost. With this, the board believes that real sector companies (non-financial or manufacturing and service sectors) will also be more willing to sell ordinary shares. However, none of the companies have applied for issuing public shares through the book building system, said KC.
In this method, the real and fair value of the securities to be issued in the primary market is determined on the basis of the demand of institutional investors who are qualified in book building. For the shares to be issued through this method, the general investor will have to apply for at least 50 units, while a minimum of 50 units will have to be given to each applicant when the organization distributes the securities.
When issuing securities through book building method, 40 percent of it should be allocated to institutional investors and 60 percent to the general public.
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