'The IPO process is often delayed as companies delay themselves when replying to queries by BSEC, or when providing documents sought by the commission'
Companies which have been waiting up to two years to raise much needed capital through Initial Public Offerings (IPOs) have expressed concern over the lengthy approval process of the regulator.
A total of 22 companies are waiting for approval from the Bangladesh Securities and Exchange Commission (BSEC) to raise over Tk1,342 crore by offloading shares through IPOs. Of these, seven applied for approval from the regulator as far back as 2016.
“BSEC tries to give approval as soon as possible, but it takes time as sometimes there is information missing in the IPO, or some points may need clarification,” BSEC spokesperson Md Saifur Rahman said.
“The IPO process is often delayed as companies delay themselves when replying to queries by BSEC, or when providing documents sought by the commission.”
The 22 companies are active in the field of medicine and in the pharmaceuticals, real estate, textile and garments, power, insurance, information technology and other manufacturing industries.
“The IPOs are all at different stages of scrutiny and the process of approval is in progress,” an unnamed BSEC official said.
A company files an IPO when it wishes to sell its shares to institutional and retail investors to raise funds. This can be done under the fixed price method or the book building method.
As per the IPO prospectuses placed before the BSEC, 11 of the companies wished to float shares using the fixed price method to raise Tk275.28 crore, while the other 11 opted to raise Tk1,066.86 crore through the book building method.
According to the information in their IPO prospectuses, most of the companies wished to raise funds in order to repay long term bank loans and to expand their existing business capacity in line with the growing demand for their respective products.
In its IPO prospectus, Popular Pharmaceuticals expressed their wish to raise Tk70 crore under the book building method. The company has already held a road show in this regard.
“We want to increase our existing production capacity, especially for the tablet and capsule manufacturing units, to cater to the growing demand in local markets,” Popular Pharmaceuticals Director (Finance And Accounts) Kazi Mohammed Badruddin said. Star Ceramics wishes to raise Tk60 crore from the capital market also under the book building method.
“(We) would like to grab a larger market share in local as well as global markets by exploring new export destinations,” Star Ceramics Chairman Syed AK Anwaruzzaman said. “To attain this goal, we want to increase our production capacity to meet growing demand both at home and abroad.”
Speaking to the Dhaka Tribune, merchant bank AFC Capital’s Chief Executive Officer Mahbub H Majumder said once primary approval has been received for a road show under the book building method, it takes almost a year to get approval for bidding to set the prices of shares.
“After price discovery through the bidding process, a company often has to wait a long time to get final approval for the IPO,” Mahbub said.
BSEC spokesperson Md Saifur Rahman said the delays were only applicable to companies which fall short of the required standards.
“If a company places the IPO prospectus while complying with all the rules and regulations, and provides the proper documents, it will get approval without any delay,” he said.