Fund raising thru IPOs falls in 2019

Mosatfizur Rahman | Published: 00:00, Dec 14,2019


Fund raising by companies through initial public offerings declined by 14 per cent in 2019 compared with that in the previous year.

Only eight companies raised Tk 552 crore while 13 companies and a mutual fund raised Tk 646 crore in the previous year.

On April 30 this year, market regulator Bangladesh Securities and Exchange Commission had stopped taking any IPO proposal until making some changes to the public issue rules that affected the primary market, experts said.

The new public issue rules were approved in September.

Experts said the current commission was heavily criticised for approving fundamentally weak companies that made it cautious over approving IPOs.

The criticisms were ignited with the approval of Coppertech Industries which was mired in controversies including allegations of faking financial data and formation of artificial paid up capital.

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 BSEC had to allow the premier bourse to assess the IPO prospectus properly with forming a strong review committee as per the demand from the stakeholders.

Besides, the market remained bearish for almost 11 months in 2019 and the key index hit a 41-month low last week, eroding confidence of investors.

Companies hesitated to float shares in the volatile market, market experts said.

They said companies went to the capital market to raise funds as the financial sector in the country became so vulnerable that it could not provide enough funds to the businesses.

But, raising capital from the capital market is not easy as it might take years to complete the process, they said.

Moreover, fund raising through IPOs hit the lowest in 2017 that pushed the regulators to take initiatives to improve the IPO situation.

Market operators said the IPO issuing companies were optimistic as the share prices of debutant companies had witnessed astronomical rises in recent years.

A group of investors usually purchase shares of the debutant companies intentionally to get quick returns from the market, they said.

The situation has recently prompted the BSEC to put a cap on the maximum rise or fall in share prices of a company on the first and second day of the trading of its shares on the bourses.

According to market experts, large companies are reluctant to get listed on the capital market as the market lacks incentives and benefits and has many rules and regulations.

Fourteen companies including one mutual fund collected Tk 646 crore through IPOs in 2018 while six companies including two mutual funds had raised Tk 249.25 crore in 2017.

Esquire Knit raised Tk 150 crore, Runner Automobiles Tk 100 crore, ADN Telecom Limited Tk 57 crore, New Line Clothings Tk 30 crore, Silco Pharmaceuticals Tk 30 crore, Copppertech Industries Tk 30 crore, SEA Pearl and Resort Tk 15 crore and Ring Shine Textiles Tk 150 crore in 2019.

Fund raising from the capital market totalled at Tk 219 crore in 2017, Tk 849 crore in 2016, Tk 830.72 crore in 2015 and Tk 1,263.62 crore in 2014.

Fund raising through issuing rights shares sank further in 2019 as only one company collected Tk 89.93 crore while two companies had collected Tk 268.52 crore in 2018.

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