Himal Press 
KATHMANDU: The initial public offering (IPO) of Ghorahi Cement Ltd is making headlines for all the wrong reasons.
The Securities Board of Nepal (Sebon) halted the IPO pending investigation on June 19, citing internal manipulation to increase subscriptions. However, Sebon has now allowed the company to relaunch the IPO on July 5 without conducting any investigation. Nevertheless, subscribers have been given the option to withdraw their applications or adjust the number of shares applied for.
Interestingly, the company’s reserved IPO for its employees and locals of the affected area had remained undersubscribed. Sebon’s decision to allow the company to resume its IPO, which wasn’t trusted even by its employees, without investigation seems unfair.
Ghorahi Cement launched its public issue of 6.91 million units of shares on June 15. The company added a premium of Rs 335 to the shares with a face value of Rs 100 each.
Sebon halted the IPO for investigation after the issue manager extended the application timeframe, even though the issue had already been oversubscribed by three times.
Who is under investigation?
Sebon has stated that it will investigate the issue by forming an inquiry committee. They mentioned allowing the IPO to proceed to prevent public funds from being locked up for an extended period.
“We will make further decisions based on the committee’s report,” said Sebon spokesperson Muktinath Shrestha.
According to Shrestha, the promoters of Ghorahi Cement, fake subscribers of the IPO, and NIC Asia Bank, which verified the fake applications, will be investigated.
Some investors subscribed to thousands of units of shares in the company despite not having sufficient funds in their bank accounts. Shrestha stated that Sebon has forwarded the names of those subscribers to the Nepal Police to investigate fraud charges.
Sebon also mentioned that it would investigate the issue managers of the IPO, Himalayan Capital Limited and Nabil Investment Banking Limited. These companies suspiciously extended the application timeframe even though the issue was already oversubscribed by three times.
Similarly, Sebon stated that it would also investigate NIC Asia Bank, which verified applications for share subscriptions despite applicants lacking sufficient funds in their bank accounts.
Concerns have been raised regarding the integrity of Care Ratings Ltd, the company that provided the credit rating for Ghorahi Cement prior to its IPO. Sebon allowed the company to launch shares at a premium rate based on the credit rating provided by Care Ratings Ltd.
A clear conflict of interest can be seen in the entire episode as the promoters of Ghorahi Cement, Bishal Group and Triveni Group, own 40% of shares in NIC Asia Bank Ltd. Additionally, Bishal Group owns 19% of Care Ratings Ltd.
The Credit Ratings Regulations, 2011 prohibits credit rating companies from rating companies if there is a conflict of interest. As per the regulations, a credit rating company cannot rate companies promoted by its own promoters.
