Sarbottam Cement has already concluded the issue manager signing ceremony for the IPO Book Building process. This will be the first incident of an IPO by the book building method in Nepal, and not by the usual procedure of issuing at a flat Rs. 100 per share.
Book building is the process by which an underwriter attempts to determine the price at which a company issues its Initial public offering (IPO). 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.
However, this method of issuing an Initial Public Offering is cumbersome, and often takes a considerable amount of time. This is because the book-building process requires the involvement of a multitude of parties. This includes the issue manager, the company itself, the regulatory board, institutional investors, etc.
The company will issue 40% of the shares to institutional investors and 60% to the general public. The company has proposed to issue an IPO worth 60 lakh shares. Sarbottam Cement is certain that the final price will not be lesser than Rs. 750 per share. However, institutional investors (book builders) have yet to bid for the IPO. After institutional investors submit bids with a quoted price for 40% of the shares (24 lakh units), the company will issue the remaining 46.66% (28 lakh units) to the general public. The company will then issue 13.33% (8 lakh units)to the project-affected people at 10% lesser than the quoted price.
Important: Sarbottam Cement IPO Open Date
Note that the company and issue managers have temporarily halted the IPO of the company for this fiscal year (FY 2077/78).
According to the clause of SEBON, the capital market regulator, companies should at least have one operational fiscal year after being a public limited company. This is why the IPO process can’t continue for this fiscal year, says Paras Mani Dhakal, CEO of issue manager Global IME Capital.
Company CEO Bharat Babu Dahal of Sarbottam Cement also confirmed the issue manager’s statement. Nonetheless, he stated that the company has been carrying out the necessary audit and the IPO process will resume at full speed immediately at the start of the upcoming fiscal year, i.e. FY 2077/78. This means that the IPO process will resume from Shrawan 01, 2077, given that the fiscal year in Nepal starts from the month of Shrawan.
Note that I said the IPO process will resume. It will still take a considerable amount of time for the company to come up with an IPO date. I will update this article at the first occurrence of news related to this.
About the Company (Company Profile)
Sarbottam Cement Limited was incorporated in October 2010 as a private limited company. Sarbottam Cement Limited was then converted into a public limited company in August 2019. It is involved in producing and selling clinker and cement. It was initially established as a plant with a capacity of ~0.4 million MTPA. The capacity currently stands at ~1 million MTPA for clinker as well as grinding.
17 individuals hold the company shares, of which the major shareholding is from the Saurabh Group (~62% stake), a prominent business house in Nepal. Currently, the group produces cement, steel, tea, spun yarn, PP Woven fabrics, calcium carbonates, and other such products. The group’s trading activities continue with imports of Konka products, Citizen watch components, and other Chinese products. Besides Sarbottam Cement, Saurabh Group owns the following companies:
- Laxmi Steels Pvt Ltd
- Jagadamba Cement
- Jagadamba Spinning Mills
- Saurabh Tea Estate
- Saurabh Shree Jagadamba Builders
- Jagadamba Synthetic
- Shubha Shree Jagadamba Cement
- Saurabh Photo International
- Force Electronics
Sarbottam Cement’s factory is located at Ramnagar VDC-05, Nawalparasi district. The company mainly manufactures ordinary Portland Cement (OPC) and Portland pozzolana cement (PPC) under the brand Sarbottam.
Sarbottam Cement Balance Sheet, Quarterly Report, Net-Worth, and Fundamental Data
Sarbottam Cement is not yet a public company on the stock exchange. As such you won’t find its financial reports online unveiled to the public. It is simply not required to do so.
Nonetheless, it has to unveil its performance reports to rating agencies on demand. Thus, we have two such glimpses into the financial performance of the manufacturing company as unveiled by ICRA Nepal.
How Rating Agencies Have Rated the Company
There are two rating agencies in Nepal: ICRA Nepal and CARE Ratings Nepal. These companies exist in order to rate the financial health and prospect of companies that issue security (bonds, shares, debenture, etc.) of any sort to the general public and the capital market. In order words, they are credit rating agencies. Simply put, the credit rating is an estimate of the ability of a person or organization to fulfil its financial commitments, based on previous dealings.
ICRA Nepal has assigned an issuer rating of [ICRANP-IR] BBB+ (pronounced ICRA NP issuer rating triple B plus) to Sarbottam Cement Limited. Issuers with BBB ratings are considered to have a moderate degree of safety regarding timely servicing of financial obligations. Such issuers carry moderate credit risk. The plus (+) sign indicates that the particular company falls one notch higher than those who get a normal BBB grade.
Going forward, ICRA Nepal states that the company’s ability to successfully complete its IPO issue as planned, judiciously manage its working capital levels as well as maintain healthy sales growth and comfortable debt coverage indicators would be the key rating sensitivities.
The rating agency also thinks the company plans to significantly lower the debt burden from the initial public offer (IPO) proceeds. The book-building IPO method will also raise a sizeable premium).
Sarbottam Cement Grade
Although this is too technical for an average reader, this is an excerpt from a quality assessment. Anjay Kumar Mishra and Abhishek Jha published this research:
The objective of the research was to analyze the variations in quality parameters of Sarbottam cement. The assessment also compared its strength with other cement brands.
The research did lab tests for compressive strength and soundness tests. Furthermore, the research performed setting time tests and chemical tests regarding the study of quality parameters.
Quality parameters were consistent within the limit of the mean chart of 6 months. The strength of all the cement tested (including of other companies) fulfilled the criteria provided by Nepal Standards. Nonetheless, higher values were of Sarbottam.
However, note that one of the researchers is employed by Sarbottam Cement itself.