KATHMANDU: Reliance Spinning Mills (RSM) is embroiled in controversy over its upcoming initial public offering (IPO), as lawmakers in a parliamentary Finance Committee meeting on Tuesday expressed concerns about the company's financial standing and the high price of its IPO shares. Dipak Khadka, a lawmaker from the Nepali Congress, questioned why RSM was allowed to issue its primary shares at a premium rate amidst a six-month halt on IPO approvals for other companies. This pause came due to the absence of a Securities Board of Nepal (SEBON) chairperson, leaving the board without leadership to make critical decisions after the retirement of former chairperson Ramesh Hamal in January.

Despite the vacancy in SEBON's leadership, the regulator granted approval to RSM on June 26 to issue its IPOs at Rs 820.80 per unit, a rate that lawmakers argue does not align with the company's financial reality. Criticism has been directed at RSM for allegedly manipulating its financial disclosures to SEBON. Specifically, concerns were raised about the company's failure to disclose a debt of Rs 753.68 million owed to the Nepal Electricity Authority for dedicated lines.

Moreover, allegations surfaced that RSM provided inflated financial figures to SEBON. Although the company's actual earnings per share are reported to be Rs 2.08, it purportedly presented this figure as Rs 54.34 per share to the regulator. Despite these discrepancies, SEBON authorized RSM to proceed with its IPO through a book-building process.

Following SEBON's approval, RSM is set to launch its IPO to the public starting Thursday, having already sold shares at a higher price of Rs 912 per unit to institutional investors in February. Experts argue that considering the company's financial liabilities, particularly the outstanding bill for dedicated lines, its net worth per share realistically amounts to only Rs 179.45. Based on this assessment, critics contend that RSM's IPO should have a more conservative opening price not exceeding Rs 538.35 per share.