Institutional bidding for United Power Generation and Distribution Company's shares will begin on May 18 under the book building method, a modern pricing mechanism.
United Power will float 3.3 crore ordinary shares of Tk 10 each.
Institutions will bid for 1.32 crore shares worth Tk 10 each; bidding will start at 2:00pm on May 18 and continue until 2:00pm on May 20, according to a notice posted on the Dhaka Stock Exchange website yesterday.
Of the rest 1.98 crore shares, 49.50 lakh shares have been kept for general investors, 33 lakh for non-resident Bangladeshis, 49.50 lakh for mutual funds and 66 lakh for affected retail investors, who lost money during market downswings in 2011.
An indicative price for each United Power share has already been built at Tk 60 through bidding by 28 institutions from six-categories at a roadshow in May last year.
Now, in the price discovery phase, bidders cannot quote 20 percent more or less than the indicative price, meaning they will have to offer a price between Tk 48 and Tk 72 for each share. Institutional investors have until May 14 to sign up for the bidding, which is a must for a company that intends to go public using the book building method, to discover a cut-off price for an initial public offering.
Book-building is a process through which an issuer attempts to determine the price to offer for its security based on demand from institutional investors. The price of an IPO share will be determined through automated bidding to be joined by different financial institutions. The shares will then be opened for the IPO participant at the bidding cut-off price.
After getting the cut-off price through institutional bidding, United Power will float the IPO, the proceeds of which will be used to repay the company's long-term debt and meet working capital demand.
On February 4, Bangladesh Securities and Exchange Commission primarily allowed United Power to go for an IPO under the book building method.
The earnings-per share of the power generation company was Tk 10.21 as of December 2012.
LankaBangla Investment is acting as the issue manager and ICB Capital Management as the IPO registrar.