Robi Axiata Limited is going to face hurdles with its plan to issue 13.6 crore shares to its employees after getting approval for its initial public offering, which is not in line with the laws of the land.
Officials of the Bangladesh Securities and Exchange Commission and the Financial Reporting Council said that Robi must issue shares to its employees before it got consent for its IPO from the BSEC and revise its IPO prospectus with necessary changes including the names of the new shareholders with declaring a two-year lock-in for their shares.
Robi chief executive officer Mahtab Uddin Ahmed on Monday met new BSEC chairman Shibli Rubayat ul Islam, BSEC officials said.
Shibli told New Age, ‘I will try to bring Robi to the country’s capital market next month as per my mission to introduce good companies.’
He said that the commission would expedite all related activities and address all problems in its IPO proposal through discussion with the mobile operator.
On March 1, Robi filed draft papers with the BSEC with a plan to float 10 per cent, or about 52.38 crore shares — 38.77 crore shares in IPO and 13.61 crore shares under employees share purchase plan (ESPP) — at Tk 10 each.
Robi, the second largest mobile operator in Bangladesh, in its IPO prospectus mentioned that the company received Tk 136.05 crore as share money deposit from its employees to issue the shares at an issue price of Tk 10 each.
‘In the event the company doesn’t list its securities on public exchanges, the deposited money will be fully refunded to the employees with interest it earned,’ it said.
The company showed the money as liability in the financial statement.
BSEC officials said that Robi’s decision regarding ESPP was wrong as there was no way to issue shares after getting IPO approval.
The company must issue the shares before getting IPO consent.
The officials said that a company could issue shares through bonus shares and right offer after IPO and all the shareholders including general shareholders would have the equal right to the issue.
Therefore, the decision may stymie the progress of the company’s IPO, they said.
Grameenphone, the leading mobile phone operator in the country, also raised Tk 486 crore through private placement in 2008 before getting a BSEC approval for its Tk 486 crore IPO in July, 2009.
FRC executive director Mohammad Mohiuddin Ahmed told New Age that if the company took money as share money deposit with a commitment to issue shares, the company could not show the fund as liability.
As per a recent FRC notification, Robi must convert the share money deposit into paid-up capital by issuing shares to the employees concerned, he said.
Mohiuddin said that if Robi would not get IPO approval, the company could not return money to the employees instead of issuing shares as per the FRC notification.
Besides, there is no way to issue shares for a particular group of people after getting IPO approval, he said.
Before IPO, Robi can issue placement shares, he said.
On February 11, the FRC issued a notification directing companies to convert share money deposit into paid-up capital within six months of receiving such fund and to bar them from withdrawing the money.
The FRC is an independent government regulatory body which regulates accounting, reporting, auditing and actuarial professions in Bangladesh. So, Robi must issue shares before getting IPO consent and also adjust those with its EPS.
The complexity will rise if the company could not get listed on the stock exchanges as employees might not be interested in purchasing shares of a non-listed and unprofitable company.
Robi sought waiver from the minimum share offloading rules, saying that a company must offload 10 per cent of its shares under the fixed price method of IPO rules.
It also sought exemption from the rules regarding lock-in on shares held by existing sponsor-directors.
Robi expected that it would complete the procedure by December this year.
With the issuance of new shares worth Tk 523.79 crore, the paid-up capital of the entity would stand at Tk 5,237.9 crore from existing Tk 4,714.1 crore.
Robi posted a Tk 17-crore profit after taxes in 2019 against Tk 215 crore a year ago.
The company has appointed IDLC Investment Limited as its issue manager.
Robi at a press conference on February 22 announced two conditions set by its parent company Malaysia-based Axiata Group — cutting the turnover tax to 0.75 per cent from 2 per cent and reducing the corporate tax rate to 35 per cent for 10 years — for the government to offload the Robi’s shares on the country’s capital market.
At the end of December last year, the net asset value of the mobile operator was around Tk 6,000 crore.
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