The company was due to get the green light from the DSE board on Thursday for direct listing despite being ineligible
Le Méridien Dhaka’s parent company Best Holdings’s bid to enter the bourses to raise Tk283 crore via the direct listing system for which it does not qualify for has been thwarted by the stock market regulator.
Earlier on November 12, Best Holdings applied to the stock market regulator and the Dhaka Stock Exchange (DSE) seeking special permission to offload 4.3 crore ordinary shares through a direct listing.
A direct listing is a process by which a company can be listed on a stock exchange without increasing its existing paid-up capital or by issuing new shares. Under the mechanism, a company can join a bourse just by offloading its existing shares to investors.
Earlier in 2016, the Bangladesh Securities and Exchange Commission in a regulatory notice directed the twin bourses not to allow any private company to being listed directly. Only the government companies or state-owned enterprises are eligible for this method of listing.
Now, Best Holdings, which is 70.4 per cent owned by individuals and private entities, have sought to enter the stock market via the method.
State-run banks Sonali, Janata, Agrani and Rupali collectively own 29.6 per cent of Best Holdings, which is used as the basis for seeking the special treatment.
Best Holdings, which has diversified interests ranging from agro-business to infrastructure development, hospitality to advertising, furnished a letter from Finance Minister AHM Mustafa Kamal recommending the exemption in its application.
The rationale for the exemption is that Best Holdings has built special expertise on infrastructure development, said the letter signed by Kamal on September 8.
Dhaka Tribune has obtained a copy of the letter.
Infrastructure development is crucial if the country is to become an advanced nation by 2041.
“It's very important to take up infrastructural projects for comprehensive development of the country,” Kamal said.
So for the companies’ funding needs, the time has now come to allow them to go for a direct listing to the stock market.
Some state bank officials have requested the finance ministry to enlist companies connected with infrastructure projects as there was banks’ investment as per Bangladesh Bank policy.
Subsequently, in the letter to the Bangladesh Bank and the BSEC, the finance ministry sought exemptions from complying with certain requirements for a direct listing.
For a direct listing, the company must be in commercial operation for at least five years, offload a minimum of 25 per cent shares and has not raised capital or issued securities (excluding bonus issue) in the past two years.
The ministry also wanted an exemption from the rules that says the offer price under direct listing would be determined through trading.
The minimum share price of the companies connected with infrastructure projects should be the price at which the scheduled banks invested at the companies, the letter said.
Best Holdings’s direct listing application was due to be placed at the 983rd meeting of the board of directors of the DSE, scheduled for Thursday.
But before the issue could be raised, the BSEC has thrown a spanner in the works.
In a letter signed by BSEC Deputy Director Mohammed Nazrul Islam dated December 15, which Dhaka Tribune has a copy of, the securities regulator questioned the authenticity of the letter from the finance minister.
Best Holdings raised a total of Tk 662.2 crore through private placements between August 2019 and June this year, which goes against the rules for a direct listing.
The company’s plan to offload 4.35 crore shares out of its total of 87.1 crore shares at Tk 65 each does not meet the offloading requirement of 25 per cent of the paid-up capital of the company and price discovery process.
Besides, its current assets from August 2016 to 2019 were reported as negative, which is contrary to provisions of the regulations.
The BSEC is also asked whether the investment made by the four state banks in the equity shares of Best Holdings by way of placement shares can be considered as owned by the government.
“You are requested to keep this application for direct listing pending till settlement of the total matter,” said the letter to the DSE managing director.
RACE Portfolio and Issue Management Company and ICB Capital Management are the issue managers for the direct listing.
Best Holdings Chairman Amin Ahmad’s phone was found switched off on Wednesday.
BSEC Chairman Shibli Rubayet-ul-Islam declined to comment on the matter.
Kamal is in Singapore for medical treatment and could not be reached for comment.