There has been a sharp decline in using Initial Public Offerings (IPO) for fund raising this year. It fell by 74.18% to Tk219.25 crore which is the lowest since 2009.
Dhaka Stock Exchange (DSE) records show that a total of six companies and a mutual fund has raised Tk219.25 crore this year, which was Tk849.30 crore in 2016. After the stock market crash in 2010, IPOs saw the highest fund raising of Tk1677.71 crore in 2011.
IPO issue manager and the stakeholders say a lack of proper policy has deterred companies from going public, with the lengthy process of getting regulator approval is one of the biggest impediment.
However a lot of companies are in the process of offloading shares to the public through the capital market, which will get approval in 2018.
“Although the price index of the stock market has seen a sharp rise and had a stable growth this year, the number of IPOs approved by the stock market regulator was not as we had expected. This is mostly likely caused by the long time it takes to get approval from the regulators,” said an IPO issue manager to the Dhaka Tribune.
“We have placed company prospectus to the regulator but did not get approval from the Bangladesh Securities and Exchange Commission (BSEC) to go public. They delay the process of approving, unnecessarily, by saying they are looking into the matter,” the manager added.
As of Tuesday, DSEX, the key index of the Dhaka Stock Exchange, ended the year closing at 6,167.56 points, the last trading day of 2017, which is up by 22.45% from 5036 points from December 29, 2016.
ABM Azizul Islam, former advisor to the caretaker government, told the Dhaka Tribune: “The failure is the government’s inability to offload shares of it’s companies to the stock market. While, the stock market regulators, stock exchanges and issue managers also cannot escape their responsibility in attracting companies to start listing with the stock exchange.”
However, both the regulators and the stock exchanges claimed they work to make the process easier.
“From the regulator and the exchanges point of view, we are giving quick feedback to hasten the process of IPOs. But because the issue manager takes too long to respond to our questions, the process slows down,” said M Shaifur Rahman Mazumdar, managing director of Chittagong Stock Exchange (CSE).
“As a regulator, BSEC's top priority is to protect investor’s interest and ensure that accurate financial statements and other documents are being submitted for proper pricing of company stocks. This is why it sometime takes a little while to approve IPO prospectus,” said Bangladesh Securities and Exchange Commission (BSEC) Executive Director Md Saifur Rahman.