The country’s stock exchanges have seen a significant growth in the launch of initial public offerings (IPOs) in 2013 following a three-year “drought.”
DSE figures show the number of IPOs has increased this year by 60% while the value rose over 13% from the previous year.
Analysts attributed the growth of IPO to a “relatively better performance of the stock markets in 2013” compared to the years since the 2010 debacle.
The country’s stock exchanges have seen 16 private companies completing IPO as of November this year, raising a total proceed of Tk8.8bn.
In 2012, there were 10 companies which had completed IPOs and raised Tk7.7bn, according to the Dhaka Stock Exchange data.
Two more IPOs will begin collection of subscriptions next month.
“IPO draught has ended as the stock markets have experienced a better year,” said MA Hafiz, president of Bangladesh Merchant Bankers Association.
The benchmark index of Dhaka Stock Exchange, DSEX, rose 8% to 4,395 as of November 21 since January this year.
Besides, higher subscription has also encouraged the companies to go public, said Hafiz, also a director of AAA Consultant, a leading issue management company in Bangladesh.
In 2012, many IPOs suffered low subscription, discouraging the companies to launch IPOs.
The companies that suffered low subscription included Summit Purbanchal Power Company and Unique Hotel and Resorts.
During the year, even the regulator had cautiously relieved IPOs because of the unsettled market.
In 2013, more than half of IPOs have raised fund to repay bank loans, according to the prospectus of the companies.
When IPOs increase, it usually means the economy is getting back its strength.
“But the perception is not true for the country’s stock markets as most of the companies here raise fund through IPOs make loan repayments,” Rezaul Haque, head of operations of Prime Finance, however,
said.
“This indicates that the business in the country was not good this year because of political chaos ahead of general election.”
The IPO market was sluggish since the beginning of 2011 when the market boomed and then doomed as the regulator has tried to limit new issues.
Seven private companies made IPOs of Tk1.4bn at the Dhaka Stock Exchange in 2011 and five in 2010.
Since 2005, IPO activity began to rise to tap the primary markets, taking advantage of growing demand for shares.
Primary market is a market where securities issued by a company for the first time are offered to the public before being listed with the stock exchange.
“Fund flow acts like oxygen in the IPO market. More new issues mean more fund flow,” said Jahangir Alam, chief executive of Janata Capital and Investment.
He said maintaining the normal flow of IPOs is very important to overcome any shortage of quality issues in future.
The most recent debutants received relatively better responses from the investors, pushing up their prices higher than the offer prices.
An IPO is a type of public offering where shares of stock in a company are sold to the general public, on a securities exchange, for the first time.
IPO is used by companies to raise expansion capital, to possibly monetize the investments of early private investors, and to become publicly traded enterprises.
