Sarbottam Cement calls AGM; Agenda to Discuss Book Building for IPO Issuance

Tue, Dec 29, 2020 12:08 PM on IPO/FPO News, AGM/Special AGM, Latest,

Sarbottam Cement Limited has called its 2nd AGM on Magh 06, 2077, i.e. January 19, 2021. The meeting will be held in the company's meeting hall in Tinkune, Kathmandu.

Among other proposals, the AGM will discuss the Book Building process for the issuance of its upcoming IPO.

A cement manufacturer in Nepal (ISO 9001 and ISO 14001 Certified), Sarbottam Cement claims it is exceptional in not just one but many ways. A sister concern of the Saurabh group, it is the first European Plant Technology in Nepal with Vertical Roller Mill (VRM). The website of the company claims this is the most advanced German Technology that produces very fine Blaine of cement, measuring up to 4500 Blaine. Apparently, this innovative technology allows them to save up to 50% in energy consumption, thereby drastically reducing their carbon footprint.

AGM notice

What exactly is the book building system?

Book building allows a company to issue IPO at a premium (higher) price for each share instead of the present practice of issuing at Rs. 100 per share.

Book Building System is the process of price discovery in which a company hires a merchant bank to decide a price range at which shares are to be issued instead of a specific price. The merchant bank is known as an underwriter or a book runner. The bank is responsible to research the issuing company and come up with a price range for its IPO shares. Once the price range is decided, the merchant bank then prepares a prospectus calling out investors to apply the shares.

Book Building System of price discovery mechanism dominates the IPO and FPO issuance worldwide. Among several other IPO issuance mechanisms such as fixed price, tender, auction, public offer method, Book Building System is considered to be the most efficient method. Several developed countries have adopted the Book Building System. This method helps to raise a large amount of capital, gain price-relevant information from potential buyers, brings in higher net revenue, provides riskier projects and access to the stock market, and liquidity to investors.

Besides, the mechanism also broadens the functions of institutional investors as it broadens the scope of services before and after IPO issuance. Besides this, the mechanism encourages local and international companies to float IPOs as it involves a fair process. GoN's one-year-old policy to introduce more manufacturing companies in the stock market has been a failure as most of the manufacturing and tech companies are hesitant to enter the stock market. So, the book-building process might be a helping hand to attain this goal as companies will no more be forced to issue shares at par value.

Read more about the Book Building Process here.