While the country’s private investment is going through a stagnant situation, the stock market regulator has given the nod to 19 companies this year for raising Tk 1,580 crore by offloading shares to the public for business expansion.
The amount approved through the initial public offerings (IPO) and rights shares issues more than doubled from last year, according to data of the Bangladesh Securities and Exchange Commissions (BSEC).
As many as 17 companies got the approval from the securities regulator to raise Tk 1,502.8 crore through IPOs and two listed firms got the nod to boost their capital base by issuing right shares amounting to Tk 77.8 crore.
Most of the approvals came at a time when the economy was reeling from the fallout of the global coronavirus pandemic, suggesting the companies are not engulfed in doom and gloom.
The funds would largely help in increasing the cash flow in the market, create jobs and ultimately help the economy to recover at a faster pace.
As per the IPO prospectus, the lion's share of the funds will be used either for the expansion of existing capacity or setting up new units and the rest would be spent for repaying loans and bearing the IPO expenses.
According to BSEC data, the new commission, which took charge in May, approved the IPO of 15 companies for raising a total of Tk 1,376.8 crore from the stock market.
“We expect Bangladesh to be one of the fastest-growing economies in the world. The robust growth in the economy will require the capital market to grow manifold,” said Rezaul Karim, executive director and spokesperson of BSEC.
The desired capital market growth will be possible though when funds are channelled more efficiently from the surplus units to the deficit units through IPO, mutual funds, exchange-traded funds, corporate bonds, derivatives and alternative investment funds.
“Recent reforms of the capital market will help to achieve the expected levels of economic growth,” he added.
The capital market watchdog would welcome more IPOs through which the big businesses would be able to manage long-term financing. This would eventually benefit the IPO winners of the primary market.
The current BSEC board has allowed many IPOs, but there was no such negative impact.
Rather, the businesses can gather their capital through IPOs and many employment opportunities are also being created.
Through this, the entrepreneurs are being benefited, the market is being benefitted, while the depth of the market is increasing.
“When the economy is suffering due to the pandemic, it is a plus point for the country. It will create more jobs, a crying need right now, and help to recover from the pandemic,” said Abu Ahmed, an honorary professor of the Dhaka University’s economics department.
The stock market is a great source of funds for industrialisation, said AB Mirza Azizul Islam, a former adviser to a caretaker government.
“But its true potential remains untapped.”
For that end, the government has to play a proactive role and set an example by offloading shares of state-owned companies.
The stock market regulator, stock exchanges and the issue managers also have key roles to play in attracting companies to the bourses, said Islam, also a former BSEC chairman.
“On the whole, we are foreseeing a win-win situation if we feel that we need to go a bit slow (regarding IPOs), or need some intervention, we will do that,” BSEC Chairman Shibli Rubayet ul Islam told Dhaka Tribune.
“We are trying to increase financing for industrialisation through the capital market. We will establish the concept that the capital market is the main source of funds for industrialisation,” he added.
Stock market insiders said the previous commission’s slow policy in giving approvals and a downward trend in the secondary market were the major factors behind the significant fall in IPOs in recent years.
An analyst at a leading brokerage house says the previous commission got a bad rap for approving IPOs of fundamentally weak companies, which made it overly cautious in approving new offerings.
The new commission approved the first IPO of Associated Oxygen on July 16, allowing the company to raise Tk 15 crore under the fixed price method.
The commission approved the IPO proposal of mobile operator Robi on September 23 to collect Tk 523.8 crore at Tk 10 a share.
It gave the nod to AFC Health, Dominage Steel Building Systems and Crystal Insurance to raise Tk 17 crore, Tk 30 crore and Tk 16 crore respectively.
The stock market regulator approved the prospectus for Lovello Ice Cream of Taufika Foods and Agro Industries to raise Tk 30 crore under the fixed price method.
Dominage Steel Building Systems raised Tk 30 crore, Crystal Insurance Tk 16 crore, E-Generation Tk 15 crore, NRB Commercial Bank Tk 120 crore, Desh General Insurance Tk 16 crore, Express Insurance Tk 26 crore and Sonali Life Insurance Tk 19 crore, all under the fixed price method.
Besides, Lub-rref Bangladesh was allowed to raise Tk 150 crore, Energypac Power Generation Tk 150 crore, Mir Akhter Hossain Tk 125 crore and Index Agro Industries Tk 50 crore under the book-building method.
Meanwhile, the previous commission allowed Walton Hi-Tech Industries to raise Tk 100 crore under the book-building method.
Pragati Life Insurance and National Polymer were allowed to raise Tk 23 crore and Tk 54.7 crore respectively through rights issues.
During the period, the regulator has rejected the IPO applications of 11 companies for violating securities rules.