Home ›› 14 May 2023 ›› Stock
Only a single company so far in the year of 2023 has received regulatory approval to go public to raise a fund of Tk 16 crore, while the securities regulator has approved three companies to issue Tk 125 crore worth of mutual funds, and two firms for bonds worth Tk 450 crore.
Meanwhile, two companies have been given the green signal to raise a total of Tk 15 crore through the SME platform.
Investors in Bangladesh have less interest in mutual funds because of poor returns from the sector, while only high-net-worth individuals can invest in bonds, and the criteria for investing in SME companies is very high
as well.
In this context, the IPO is the best-fit investment option for retail investors, but the number of IPO listings remains very low in the country.
Mohammad Rezaul Karim, executive director and spokesperson for the stock regulator Bangladesh Securities and Exchange Commission (BSEC) told The Business Post that IPO proposals usually come to the commission at a certain time of a year, and currently, there was no fresh application for the IPO.
“Companies generally apply for the IPO listing just before the end of their respective accounting years. June-closing companies, for example, apply in April, while the December-closing firms usually apply in the late October,” he said.
“At the same time, there are many issues to scrutinise to allow a company to go public.”
“Unlike IPOs, companies do not follow any certain timeframe to apply for the bond. Upon their proposals, the SBEC allows companies to issue bonds if all criteria are met,” the BSEC spokesperson continued.
Till April 2023, Trust Life Insurance Company was the single company that secured approval to raise Tk 16 crore through an IPO.
Meanwhile, in the first four months of the current year, two companies – MR Footwear PLC and Al-Madina Pharmaceuticals – were approved to raise Tk 10 crore and Tk 5 crore respectively from the SME platform.
The capital market regulator in the first four months of 2022, had similarly allowed a single IPO, but in the given period, at least seven institutions had been allowed for issuing bonds.
Apart from bonds, the commission had also been active in approving mutual funds and SME companies during that time last year.
From January to April last year, the BSEC had allowed seven institutions to issue bonds worth over Tk 2,647 crore.
While, only Meghna Insurance Company was allowed to raise Tk 16 crore through an IPO.
In the given period of 2022, four SME firms were allowed to raise a total of Tk 57 crore from the capital market, while Tk 85 worth of mutual funds had also been allowed during that period.
The BSEC from January to April 2021, had approved four companies to issue a total of Tk 2,550 crore worth of bonds, while Tk 30 crore worth of mutual funds had also been allowed by the regulator during that time.
In the given period that year, only Baraka Patanga Company had been allowed to raise Tk 225 crore from the market through an IPO under the book-building method.
Abu Ahmed, a capital market analyst and former Dhaka University professor, told The Business Post that if the bond market is strong, it creates new investment opportunities for institutional investors, but it does not entertain retail investors at all.
“Our retail investors feel comfortable in investing company shares. Therefore, the stock regulator should focus on bringing in more new companies into the market,” he added.
Echoing similarly, Debabrata Kumar Sarkar, former chief research officer at BRAC EPL Investments, said the expansion of the bond market is good for financial institutions, including large entrepreneurs, and high net-worth individuals. But the country’s general investors are quite unfamiliar with bonds, and mutual funds.
Furthermore, when new companies come into the market, investors can diversify their investment portfolios which also reduce the scope of manipulation, this analyst stated.
BSEC spokesperson Mohammad Rezaul Karim said currently, the number of IPO aspirants remains low due to the ongoing global economic turbulence, and after the Russia-Ukraine war, the number of companies wishing to be listed on the SME platform, decreased as well.
In the first four months of 2020, the BSEC had approved Tk 105 crore worth of mutual funds, Tk 26.75 crore worth IPO under the fixed price, Tk 787 crore of bonds, and Tk 150 crore worth of IPOs for two companies under the book-building method.
ANM Ataullah Naeem, president of Capital Market Investors Sammilit Jatiya Oikya said, “Our general investors are still unfamiliar with the community market, bond market, and open-ended funds. As a result, the approvals of such instruments are failing to contribute to the development of the country’s capital market.
“The commission should create confidence among the investors in the secondary market. Then they can take other initiatives,” he added.
