The capital market regulator, Bangladesh Securities and Exchange Commission, under the current commission led by chairman M Khairul Hossain has approved around 60 initial public offerings despite the Dhaka Stock Exchange raising reservations about the IPOs.
Of the IPO issuing companies, the share prices of around 20 companies later dropped below their issue prices, DSE data showed.
The current commission with M Khairul Hossain at the helm has so far approved IPOs of around 90 companies since 2011 and the DSE raised reservations about 60 of them.
The figure gives a glimpse of how many weak companies were approved by the current commission, DSE officials said.
They said that their comments and recommendations regarding the IPOs were ignored by the regulator.
The bourse had mentioned in its observations many rules violation by the companies but the commission ignored those, paving the way for many ‘weak’ companies entering the capital market, they said.
Of the 60 IPOs about which the DSE shared its reservations, around 20 companies are being traded below the issue prices and another 11 companies are being traded near the face value.
Generation Next, Appollo Ispat, C&A Textile, Family Textiles, Fareast Finance, Mozaffar Hossain Spinning, Olympic Accessories, and Zaheen Spinning had received negative recommendations from the country’s premier bourse and the shares of the companies are now being traded below Tk 10 per share.
The share prices of Khulna Printing, Emerald Oil, Evince Textiles, National Feed, Far East Knitting, Pacific Denims, Yeakin Polymer, Sunlife Insurance, Khan Brothers Woven, Regent Textile and Central Pharmaceuticals are hovering at their face value. The DSE had raised reservations about these companies’ IPOs also.
In recent months, the DSE made negative observations about IPOs of Intraco Refueling Station, Oimex, Advent Pharma, Queen South Textile, VFS Thread Dyeing, ML Dyeing, Kattali Textiles, Indo-Bangla Pharmaceuticals, SS Steel, New Line Clothings, and Silco Pharmaceuticals.
DSE officials said the BSEC took no heed of the bourse’s reservations and approved the IPOs of the companies, making the market more vulnerable.
Former BSEC chairman Faruque Ahmed Siddique told New Age on Thursday that if the bourse made any observation about any company, the BSEC as its regulator should appraise the opinion with significance.
He said that the regulator and bourses should work in unison for the sake of market development.
‘The BSEC is the regulator of the DSE, and any kind of conflict between them might hurt confidence of the investors,’ he said.
Stakeholders blamed that many companies that were enlisted on the capital market in recent years entered the market only for share business, not for improving their business.
Huge amount of placement shares were issued by them just within a couple years of IPO applications that sucked copious amount fund from the secondary market, they said.
They said the placement shareholders after the end of lock-in period dumped huge amount of shares on the general investors by raising the share prices artificially.
To avoid criticisms, the BSEC were putting the blame on issue managers and auditors.
According to market experts, the regulator can not avoid its responsibility for the chaotic situation by putting the blame on others as the issue managers and auditors were regulated by it.
The watchdog apparently did not take any action against any issue manager or auditor for bringing fraudulent and weak companies, they said.
Despite widespread criticisms against the current commission, the BSEC did not hesitate to approve the Coppertech Industries’ IPO, which was mired in controversies including allegations of faking financial data and formation of artificial paid up capital.
Initially the DSE had given positive observations about the company’s IPO, but later it backtracked on its position after the media reported some anomalies against the company and the bourse urged the BSEC to consider the matter.
But, the BSEC took no heed of the suggestions made by the bourse and the Institute of Chartered Accountant of Bangladesh that had launched a probe into the audit reports of the company and cancelled the licence of its auditor Ahmad and Akhtar.
More than 50 per cent of the IPOs approved by the commission since 2011 were alleged to be fundamentally weak that raised question about the BSEC’s capability and intention, market experts said.
BSEC executive director and spokesperson Saifur Rahman told new Age that when the DSE sent observations about any company’s IPO, the BSEC examined the feedback of the bourse and sought explanation with further documentation from the issuer concerned.
The commission approves the IPO if only the company proves itself not guilty, he said.
However, not all the companies that received positive recommendations about their IPOs from the DSE are performing well, DSE data showed.
For instance, the shares of Tung Hai Knitting, Zahintex Industries and GBB Power are being traded far below their issue prices.
Moreover, a large number of investors have lost their confidence in the stock market for overall regulatory activities.
Khairul joined the commission as its chairman on May 15, 2011 for three years. Later, the government extended his tenure first by four years and then by two years.
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