Home ›› 27 Dec 2022 ›› Front
Nine companies raised Tk 1,088 crore through initial public offerings (IPOs) in 2022, but they only utilised 10.13 per cent of the funds for expanding their businesses, despite the ongoing economic headwind.
In the last fiscal year, 19 companies invested 56.5 per cent of their IPO funds in business expansion amid the Covid-19 pandemic. Experts say if a company raises fresh capital, it reflects the fact that economic activities will pick up soon, but the reality was different in 2022.
Experts say companies from the manufacturing or services sector raised fresh capital in 2022, but most of these funds were not used for expansion, which is a bad trend for the economy.
According to the BRAC EPL Stock Brokerage data, Tk 1,088 crore was raised by nine companies in 2022. Only Tk 110.3 crore has been set aside for business expansion, while Tk 149.9 crore or 13.77 per cent has been set aside for capital market investment.
Meanwhile, Tk 741.7 crore, or 69.09 per cent of the total fund, was invested in SME, project finance, fixed deposit receipts (FDR), treasury bonds, and government securities in 2022.
The remaining funds were used to repay bank loans and IPO expenses, as per the IPO prospectuses of the companies.
Twenty companies raised Tk 1,150.86 crore in 2021, hitting the highest level in nine years. The figure was Tk 985 crore raised through eight IPOs in 2020, which is close to the previous best of Tk 1,842 crore raised in 2012.
Market insiders said the IPO funds would normally largely help increase cash flow in the market, create jobs, and help with economic recovery.
According to the companies’ IPO prospectuses, a small share of the funds is being used either for expanding the existing capacity or setting up new units.
The rest of funds are being used for the capital market, SME, project finance, the FRD, Treasury bonds, government securities, repaying loans, and bearing IPO expenses.
The stock market regulator Bangladesh Securities And Exchange Commission (BSEC) rules dictate that no more than one-third of issued proceeds can be used for repaying loans or as working capital.
In 2022, Navana Pharmaceutical and JMI Hospital Requisite Manufacturing each raised Tk 75 crore under the book building method.
Meanwhile, Union Insurance raised Tk 19.4 crore, BD Thai Food raised Tk 15 crore, Union Bank Tk 428 crore, Meghna Insurance Company Tk 15 crores, Chartered Life Insurance Tk 15 crore, Global Islami Bank Ltd raised Tk 425 crore, and Islami Commercial Insurance raised Tk 20.26 crore from the capital market under the fixed price method.
Abu Ahmed, an honorary professor of Dhaka University’s economics department, said on the matter, “The stock market is a great source of funds for industrialisation. It will create more jobs, a crying need right now, and help to recover from the pandemic.
“The stock market regulator, stock exchanges, and the issue managers also have key roles to play in attracting companies to get listed with the exchanges.”
He added, “Some multinational companies are doing business in our country, but they are not listed with the bourses. However, they are publicly listed in neighbouring countries. “They should be offered a tax waiver in the interest of our capital market.”
“The more multinational companies get listed, the more the country’s capital market becomes stable.”
Commenting on the matter, BSEC Executive Director and Spokesperson Mohammad Rezaul Karim told The Business Post, “The profit margin of manufacturing sector companies has decreased due to the
Russia-Ukraine war.
“As a result, some companies could not fulfil the conditions of IPO. Again, there is some liquidity crisis in the stock market. Due to this, the number of IPOs has decreased. Several companies are in the process of IPO.”
He continued, “The commission tries to give approval as soon as possible, but sometimes it takes time as there is information missing in the IPO application, or some points may need further clarification.
“If a company places the IPO prospectus while complying with all the rules and regulations and provides the proper documents, it will get approval without any delay.”
Around Tk 550 crore was raised in 2019, Tk 655 crore in 2018, Tk 1,442 crore in 2017, Tk 950 crore in
2016, Tk 675 crore in 2015, Tk 3,263 crore in 2014, Tk 910 crore in 2013, Tk 1,842 crore in 2012, Tk 3,233 crore
in 2011, Tk 3,390 crore in 2010, and Tk 917 crore in 2009, show the BSEC data.
