Fund raising through initial public offering by companies declined by 23 per cent or Tk 135 crore in nine months of this year compared with that in the same period in the previous year despite a bullish trend at the country’s stock market.
The Bangladesh Securities and Exchange Commission approved IPOs of eight companies to raise Tk 449.25 crore in January- September of 2017 while it had approved IPOs of seven entities to pool Tk 584.30 crore in the same period of the previous year.
Analysts said a strict stance taken by the regulatory body regarding approval of any IPO was the main reason for the decline in fund raising through IPOs.
Moreover, the BSEC amended the public issue rules on July 6, 2017 that delayed IPO seeking companies to get the advantage of the market improvement.
The companies required more time to fulfil the requirements under the amended public issue rules and started fresh procedure to get the BSEC’s approval, BESEC officials said.
The regulator didn’t rush to give approval to an entity’s IPO without checking the requirements the company supposed to meet, they said.
Dhaka Stock Exchange director Shakil Rizbi said that the BSEC now scanned many issues in giving IPO approval including compliance, financial health and management as many poor companies already got listed with the bourse.
He said that the large companies were reluctant to get listed with the capital market as the market lacked incentives and benefits.
On October 4, prime minister’s economic adviser Mashiur Rahman at the World Investor Week 2017 being held in Dhaka said that there were not enough instruments for investing in the market and the deficit of good instruments should be addressed soon to attract more investments to the stock market.
Although 18 companies were in the pipeline from January this year to raise Tk 813 crore from the capital market,
BESEC so far could allow IPOs of eight of them.
The slow pace of IPO approval by the regulator seemed to have a negative impact on fund raising from the capital market.
Although the number of IPOs increased, the amount of fund was
remained low as most of them were small-capitalised companies and applied for IPOs under the fixed price method.
Floating shares in the capital market through the fixed price method is comparatively easier and time saving than the book
building method, officials said.
Of the companies in the IPO pipeline, Dhaka Regency Hotel & Resort applied to raise Tk 60 crore under book-building method, STS Holding Tk 75 crore, Runner Auto Tk 100 crore, Bengal Poly & Paper Sacks Tk 55 crore, Popular Pharmaceuticals Tk 70 crore, Index Agro Tk 100 crore and Delta Hospital Tk 50 crore.
VFS Thread Dyeing applied to raise Tk 22 crore under the fixed price method, Intraco Refuelling Tk 20 crore, Amulet Pharmaceuticals Tk 15 crore, GENEX Infosis Tk 20 crore and Kattoli Textile Tk 34 crore.
Fund raising from the capital market hit a six-year low in 2016 as only eight companies raised Tk 659.30 crore from the capital market during the period.
In 2015 nine companies raised Tk 675.72 crore from the market, while 16 companies raised Tk 1,158.10 crore in 2011.
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