KATHMANDU, July 10:Reliance Spinning Mills (RSM), which is in the process of issuing its initial public offerings (IPOs), has courted controversy regarding its financial status.
Lawmakers in the parliamentary Finance Committee meeting on Tuesday raised their suspicion on the company’s intention to float the primary shares at an expensive price. “At a time when the process of IPO issuance of other companies has been halted for six months, how has Reliance Spinning Mills been permitted to issue its primary shares at premium rates,” questioned Dipak Khadka, a lawmaker from the Nepali Congress.
The process of providing approval to listed companies to float primary shares was put on hold with the government failing to appoint a chair of the Securities Board of Nepal (SEBON) for a long time. After former SEBON Chairperson Ramesh Hamal retired from his position in January, the board is without a leader to take vital decisions.
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Despite not having its chairperson in place, the regulator on June 26 permitted the RSM to issue its IPOs at the rate of Rs 820.80 per unit. However, the prescribed rate is not on par with the financial status of the company.
The company has been blamed for manipulating its financial details while applying for the IPO at the SEBON. The company has not mentioned the due amount of Rs 753.68 million that it owes to Nepal Electricity Authority for using dedicated lines.
Likewise, the company is also found producing fake financial details to the SEBON. Although, earning per share of the company is just Rs 2.08, it showed the figure at Rs 54.34 per share before the sector’s regulator. However, the regulator has permitted the company to float its IPOs through a book-building process.
After receiving SEBON’s approval, the RSM is issuing its primary shares to the general public starting from Thursday. In February, the company already sold its primary shares at as high as Rs 912 per unit to institutional investors.
According to experts, the company’s networth stands at just Rs 179.45 per share if its financial liability of dedicated lines bill is considered. Based on the fact, the opening range of the company’s IPO should not cross Rs 538.35 per share.
