Allow SMEs to have post-IPO paid-up capital below Tk 50cr

BMBA urges BSEC to amend SME rules

Mostafizur Rahman | Published: 23:43, Apr 04,2020


The Bangladesh Merchant Bankers Association has proposed that the Bangladesh Securities and Exchange Commission should allow the small and medium enterprises to have post-IPO paid-up capital below Tk 50 crore.

As per existing rules, an SME must have at least Tk 5 crore and below Tk 30 crore in paid-up capital after raising fund through an initial public offering.

The BMBA has recently sent a letter to the stock market regulator, making the proposal, BMBA officials said.

They said that the association requested the commission to consider the highest ceiling at below Tk 50 crore for both fixed price method and book building method of fund raising under the SME rules.

In addition to the capital raising, there are some other complex issues in the rules that also should be amended for drawing attention of good companies.

The BSEC (qualified investor offer by small capital companies) Rules, 2018 was issued on January, 30 last year and no company has so far got listed under the rules due to the complexities, merchant bankers said.

According to the securities rules related with the SME platform, any public limited company is eligible to raise fund and get listed on the small capital platform.

The minimum capital of a company willing to raise capital through the book-building system must be Tk 10 crore before its listing on the SME platform, the rules said.

In the case of the paid-up capital of an SME company crossing Tk 30 crore, it must compulsorily apply for listing on the main board, the rules said.

The BMBA proposed that if the paid-up capital of an SME company reached Tk 50 crore, it should apply for listing on the main board.

BMBA president Sayadur Rahman told New Age that the association urged the commission to make the change in the SME rules as the new public issue rules made it mandatory for companies to have minimum Tk 50 crore in post-IPO paid-up capital to get listed on the main board, raising it from Tk 30 crore.

So, the companies whose paid-up capital is below Tk 50 crore should be given a chance to be listed on the stock exchanges, he said.

BMBA officials said that small companies were not showing interest to get listed on the SME board as they found complexities in the rules.

Cost and compliance are almost the same, and raising a small amount of fund is not beneficial for them, they said.

Although more than a year passed, only two companies filed IPO documents with two stock exchanges and one of the two applications was rejected due to fraudulent activities.

The officials said that the BSEC agreed to review their proposal and also to ease some other rules so that small companies became interested to be listed on the board.

On April 30, 2019, the country’s premier bourse Dhaka Stock Exchange launched ‘DSE SME Platform’ to facilitate the growth of small and medium enterprises.

Only qualified investors including financial institutions, merchant bankers, portfolio managers and individuals having minimum net worth of Tk 1 crore can submit their intention to subscribe the issue offered by the SMEs for fund raising.

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