The number of IPO-fund raising companies in the country’s capital market hit eleven-year low in the just concluded fiscal year of 2016-17 amid complexities over public issue rule amendment and declining bank loan interest rate.
According to a Dhaka Stock Exchange data, nine companies including three mutual funds raised fund worth Tk 390 crore from the stock market in the FY 2016-17.
The figure was the lowest since the FY 2005-06 when eight companies raised fund worth around Tk 100 crore from the country’s capital market.
DSE sources said that amendment of the public issue rules by the Bangladesh Securities and Exchange Commission twice within just one and a half years was the main reason for the fall in fund raising by companies in terms of value and number.
The commission for the last time amended public issue rules on June 13 this year with a view to containing syndication in determining cut-off price for initial public offering.
The rules were earlier amended on December 31, 2015 to make the IPO book building method mandatory for premium-seeking companies that resulted in resubmission of IPO proposals by the companies which had already applied for the IPO floatation to the regulator.
Besides, stricter securities rules made it time consuming for the IPO-seeking companies to prepare an application to pool money from the capital market, the sources said.
On the other hand, declining rates of interest on bank loans for the last couple of years were among other reasons for the recent fall in the number of IPO-seeking companies.
The weighted average lending rate in banks declined to 9.62 per cent from around 13 a couple of years ago.
In the FY 2016-17, fund raising from the country’s capital market in terms of amount declined by 54 per cent, or Tk 468 crore, against that in the previous year.
In the FY 2015-16, eleven companies including two mutual funds raised Tk 8,58 crore from the country’s capital market.
Fund raising from the country’s capital market by companies was all-time high in 2009-10 when 23 companies raised more than Tk 3,000 crore from the capital market during a market boom that subsequently bust.
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