Reliance Spinning IPO Investors Suffer Losses on First Day of Secondary Market Trading

Investors who purchased shares of Reliance Spinning Mills Limited through the book-building method incurred losses of up to Rs 520.80 per share on the very first day of trading in the secondary market.

Qualified Institutional Investors (QIIs) had subscribed to the shares at Rs 912 per unit, while general public investors purchased them at Rs 820.80 per unit. The Securities Board of Nepal (SEBON) had approved the public offering at a 10 percent discount to the price bid by institutional investors.

Although the company’s initial public offering (IPO) attracted strong investor interest and was oversubscribed, the shares debuted in the secondary market at a significantly lower price. Following the listing of 19 million shares on Nepal Stock Exchange (NEPSE) on February 13, the stock exchange fixed the opening price range between Rs 100 and Rs 300 per share under its revised pricing mechanism, which uses the face value as the basis for determining the initial trading range.

As a result, the first transaction took place on February 16 at Rs 300 per share. During the special pre-open session and subsequent regular trading, the stock traded as high as Rs 330 per share, marking a 10 percent increase from the opening price. However, even at Rs 330, investors who had purchased shares at Rs 820.80 and Rs 912 incurred substantial losses.

Reliance Spinning Mills has expressed dissatisfaction, stating that the pricing mechanism adopted during its listing differed from the practice previously applied to other newly listed companies. In the past, NEPSE typically determined the opening price range based on the company’s net worth per share, allowing trading within a band extending up to three times that value.

Tulsi Ram Dhakal, president of the Nepal Investors Forum, said regulatory shortcomings were largely responsible for the situation in which investors were compelled to sell at a loss on the first day of trading. He added that the incident serves as a lesson for investors who assume that IPOs, follow-on public offerings (FPOs) and shares issued at a premium automatically guarantee profits.

Dhakal described the loss-making debut of shares issued under the book-building method as unfortunate for the capital market. Since investors participate in the market to earn returns, he suggested that regulators should approve only those public offerings that demonstrate reasonable prospects of profitability.

The company had issued 10.14 percent of its paid-up capital of Rs 1.90 billion, amounting to 1,926,600 shares worth Rs 192.66 million. Of the total issue, 40 percent was allocated to qualified institutional investors and 60 percent to the general public, including Nepalis working abroad, mutual funds and employees.

Shares held by promoters, employees and mutual funds remain under lock-in provisions. Promoter and employee shares are locked in for three years from the date of allotment to the general public, institutional investors’ shares for one year, and mutual fund shares for six months.

Reliance had completed the first phase of share allotment to qualified institutional investors in January-February 2024 and proceeded with the second phase of public issuance in November- December 2025 after nearly two years.