"Reliance Spinning Mills is an absolutely lucrative investment"

KATHMANDU, JULY 8: Established in Itahari, Sunsari, Reliance Spinning Mills earned NPR 927.8 million in the last fiscal year. However, it saw a 97.13% profit decrease to NPR 26.3 million in the first nine months of the current fiscal year. Moreover, the company owes as much as NPR 750 million to the Nepal Electricity Authority for electricity dues.

Interestingly, the company is set to come up with an Initial Public Offering (IPO) through the book-building process.  Reliance Spinning Mills will be issuing 11,55,960 units of shares for common investors starting July 11.  Out of this number,  10% i.e. 1,15,596 units will be issued to Nepalese citizens working abroad and the remaining 10,40,364 units to the general public.

 In this context, aarthiknews.com talked with Shashikant Agrawal, Director of the company, about these issues. Below is a summary of his views:

The earnings of our company have definitely decreased now compared to the past. There are various valid reasons behind this. First, it was badly hit by the economic recession both nationally and internationally, triggered mainly by the COVID-19 pandemic

. With this, both the production and demand for yarn plunged. Second, the supply of electricity to the company was stopped by the Nepal Electricity Authority (NEA) for several days. Because of this, production was below 95% capacity, and the competitive edge of our products was eroded. (Due to high competition, if a spinning mill industry is not run at least 95% capacity, it will be unable to penetrate the market effectively).

Despite all this, the quarterly financial reports produced over the last four to five years suggest that we are still the best among all production-based companies listed on the stock exchange. Lately, there has been a gradual minimization in the magnitude of problems hampering the economic health of the company. So, the fourth quarterly report of this fiscal year, which will be disclosed soon, is expected to be better than the previous ones.

Reliance, which has already established itself as a veteran market leader, is leveraging strategic policies and plans to continuously improve its financial performance. This is sure to translate into substantial profits from the next fiscal year. This means the general public will get proper returns by investing in its stocks. It is the main reason that we have decided to issue primary shares at a premium price rather than at face value. The decision was based not only on the standard formula but also on consultations held with various bankers, chartered accountants, and related experts

While allotting stocks to Qualified Institutional Investors, the cut-off price was set at Rs 912 per unit. The shares for the general public will be available at 10 per cent less than the cut-off price i.e. Rs 820.80 per share.

 As per the rules of the Securities Board of Nepal (SEBON), we are selling a minimum of 50 units of shares to each eligible buyer.

We are planning to mobilize the money generated from the IPO issuance to build a 12 MW solar plant. This is aimed at resolving the perennial power crisis we have long been subjected to.

Regarding the issue of managing our financial liabilities, we have been very ethical and accountable. There is no delay of even a single day in paying interest and principal for loans borrowed by the company. Therefore, Reliance Spinning Mills is a 100 percent safe and reliable company for investment.