The approval comes at a time when the economy is reeling from fallout of the Covid-19 pandemic
While the country’s private investment is going through a stagnant situation, the Bangladesh Securities and Exchange Commission (BSEC) has given the nod to 10 companies for raising Tk1,100 crore in funds by offloading shares in the last three month to the public to expand businesses.
The approval comes at a time when the economy is reeling from fallout of the Covid-19 pandemic.
It is said that the funds, that would be raised, would help largely in increasing cash flow in the market, create jobs and ultimately help the economic recovery.
As per the initial public offering (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 to be spent for repaying loans and bearing the IPO expenses.
According to BSEC data, the new commission, headed by Prof Shibli Rubayat-Ul-Islam, approved IPO of 10 companies in last three month to raise Tk1,100 crore from the stock market by issuing shares to general investors.
The figure is significantly higher compared to Tk641.93 crore raised by nine companies in 2019.
“When the economy is suffering due to the pandemic, it is plus point for the country. It will create more jobs, a crying need right now, and help to recover from the pandemic,” Prof Abu Ahmed told Dhaka Tribune.
Although the stock market is a great source of funds for industrialization, the opportunity remains untapped.
In going for massive job creation and business expansion, stakeholders should play active roles, opined economist and stock market experts.
“The stock market is a great source of funds for industrialization, but its true potential is still untapped” former adviser to the caretaker government AB Mirza Azizul Islam told Dhaka Tribune.
To attract private entrepreneurs, the government has to set an example by offloading shares of state-owned companies in the stock markets, said the economist.
The stock market regulator, stock exchanges, and issue managers also have key roles to play in attracting companies to get listed with the exchanges, said Aziz, also a former BSEC chairman.
Responding to query on stock market role to provide fund for investment, BSEC chairman Prof Shibli Rubayat-Ul-Islam said: “We are trying to increase financing for industrialization through the capital market. We will establish the concept that the capital market is the main source of funds for industrialization.”
Besides providing funds for investment, the new IPOs will also increase the stock market depth and supply of shares. However, the commission has to be cautious so that bad companies cannot chance to offload shares, he added.
7 IPOs rejected
Meanwhile, the stock market regulator has so far rejected the IPO applications of seven companies for violating securities rules, after a new chairman took charge in May.
“The new company will increase market depth as it will enhance supply of shares. It will also bring more new investments in the market as well as help,” Shakil Rizvi, a shareholder director of Dhaka Stock Exchange (DSE), told Dhaka Tribune.
But the commission has to be careful so that too many companies are not allowed going public at a time as it may impact the secondary market, said the stock broker.
However, BSEC said it very cautious about investor’s rights and they are not allowing bad companies to raise fund
“We have already cancelled IPO proposals of some companies based on our observations and those of the stock exchanges themselves. Many inconsistencies were detected in the financial statements of companies whose IPO proposals were rejected” said Shibli Rubayat-Ul-Islam.
The BSEC allowed six companies to raise Tk631 crore under the fixed price method and four companies to raise Tk475 crore under the book building method.
The new commission approved the first IPO of Associated Oxygen on July 16, allowing the company to raise Tk15 crore under the fixed price method.
The commission approved the IPO proposal of multinational telecom company Robi Axiata Limited on September 23 to collect Tk 523.79 crore through the fixed price method.
It gave the nod to AFC Health Limited, Dominage Steel Building Systems Limited and Crystal Insurance to raise Tk17 crore, Tk30 crore and Tk16 crore respectively.
The stock market regulator on Thursday approved the prospectus for IPO of Lovello Ice-cream of Taufika Foods and Agro Industries Limited to raise Tk30 crore under the fixed price method.
Besides, Lub-rref Bangladesh was allowed to raise Tk 150 crore, Energypac Power Generation Tk150 crore, Mir Akhter Hossain Limited Tk125 crore and Index Agro Industries Tk50 crore under the book building method.
During the period, the regulator has so far rejected the IPO applications of seven companies for violating securities rules.
BSEC officials said that the commission found a number of inconsistencies in the financial documents of those companies and rejected them .
The companies whose IPO proposals were rejected were Infinity Technology International, B Brothers Garments, BD Paints, Beka Garments, JMI Hospital Requisite Manufacturing, SF Textile Industries and Al-Faruque Bags Limited.