BSEC asks CSE to explain why Bashundhara’s ABG was chosen

The Bangladesh Securities and Exchange Commission (BSEC) has asked the Chittagong Stock Exchange to clarify why it has proposed ABG Limited, a sister concern of Bashundhara Group, as a strategic investor.

The capital market regulator also wanted to know the experience and capacity of ABG Limited in stock business as well as the process of offering a 25 per cent stake in the Chittagong Stock Exchange (CSE) to the company.

ABG Limited is offering Tk 15 for a share, but the CSE’s asking price is based on a 2016 valuation and does not reflect the current market situation, the BSEC said. At Tk 15 per share, the 25 per cent stake will cost around Tk 240 crore.

Meanwhile, the port city bourse has not submitted any documents to the BSEC showing ABG Limited’s capacity and experience in the capital market.

The stock market regulator on August 17 issued a letter in this regard, which was sent to the CSE’s acting managing director on the same day.

Earlier, ABG Limited submitted a proposal to the CSE to become its strategic partner. The CSE sent the proposal to the BSEC on August 1.

As per the valuation report prepared by KPMG based on the CSE’s financials up to 2016, the indicative value was Tk 11.75 per share according to the discounted cash flow method, Tk 11.04 per share according to the price to earnings ratio, and Tk 28.87 per share according to the price to book ratio.

The CSE did not update the valuation report and did not mention the share price discovery process either, the BSEC said.

On November 13, 2016, the port city bourse published an invitation to submit an expression of interest to be its strategic investor in only one newspaper.

In this connection, the CSE has been requested to explain its position regarding the preliminary scrutiny, selection, and assessment of the bidding process while considering the expression of interest for selling shares to the proposed strategic investor, as per BSEC officials.

ABG Limited is a private limited company which has sufficient resources, adequate manpower, requisite skills, and investment capacity in the security market.

However, the CSE did not submit any documents showing the company’s capacity and experience in the capital market, the stock market regulator said.

Besides, the August 17 letter asked ABG Limited to deliver a presentation to the BSEC about its future plans on Monday (August 29).

Md Golam Faruqe, acting managing director of the CSE, declined to comment on the matter. 

“The CSE will be playing a pioneering role in the capital market’s development in Bangladesh,” he said. 

The CSE has been looking for strategic partners from India, China, the United Arab Emirates, and Hong Kong for several years to sell 25 per cent of its ownership under the Demutualisation Scheme. 

After the 2010 stock market crash, stakeholders demanded the government ensure monitoring to stop manipulation and bring transparency to the market to restore investors’ confidence. Following the demand, the demutualisation act was passed in parliament in 2013.

With a view to making it a more professional and profitable organisation, the CSE went through demutualisation in 2013, a process that separated its ownership from management.

According to the demutualisation act 2013, 40 per cent of the CSE’s shares were credited to its members’ accounts while the remaining 60 per cent were kept in a blocked account.

Of the 60 per cent, 35 per cent would be offered in an initial public offering by the exchange while the remaining 25 per cent would be held by the strategic investor. 

In September 2018, the much-anticipated strategic partnership agreement between the Dhaka Stock Exchange (DSE) and the Chinese consortium of Shenzhen Stock Exchange and Shanghai Stock Exchange came into effect.

The DSE authorities handed over 25 per cent of their shares to the consortium, which paid Tk 947 crore.

The CSE began its journey in 1995 in Chattogram through the open outcry trading system. The fully automated bourse is the first to introduce online trading system in Bangladesh.

It has a paid-up capital of Tk 634 crore and assets of Tk 802 crore, according to last year’s financial report. Equity securities and mutual funds are mainly traded on the stock exchange.