Public offers hit record in 2010

A record number of new IPOs hit the stockmarket this year that sees its last trading today.

According to stockmarket data, a total of 23 initial public offerings (IPOs) worth around Tk 3,500 crore came in the market this year, while the number was 15 last year with a value of Tk 1,900 crore.

Of this year’s new arrivals, 11 were equity securities, 10 mutual funds or investment securities and two convertible bonds.

“It’s good for the stockmarket that it has absorbed a record number of new issues this year,” said Arif Khan, president of Bangladesh Merchant Bankers’ Association.

But, he said, the number could be higher if there were no regulatory complexities in raising fund by new companies through IPO.

“There are many companies whose business is good, profit is enough and have interest to come to the market, but their small paid-up capital structure does not allow them to launch IPO,” he said.

Presently, companies with a minimum paid-up capital of Tk 18 crore are allowed to raise fund from the stockmarket through IPO. However, a company’s IPO size should be minimum Tk 12 crore.

The stockmarket regulator revised the IPO regulations in October this year following heavy criticism from market experts, economists and entrepreneurs, and requests from merchant bankers to reset the previous IPO rules.

In line with the previous IPO rules that were laid out in March this year on the government’s prescription, a company must had a minimum of Tk 40 crore in paid-up capital, including the IPO size, to list on the exchanges.

If the company’s existing paid-up capital and IPO offer size was Tk 75 crore, it had to offer new shares equivalent to 40 percent of Tk 75 crore, while the percentage ratio for paid-up capital above Tk 75 crore to Tk 150 crore was 25 percent or Tk 30 crore, whichever higher; and for more than Tk 150 crore it was 15 percent or Tk 40 crore, whichever higher.

Now, there will be no such slabs.

With the previous rules in place, only a few companies entered the market.

“In the coming year, the number of IPO should not be less than 50, as the merchant banks are working with a lot of non-listed companies to bring them in the market,” said Khan, also deputy managing director of IDLC Finance.

He, however, said the merchant banks, which act as issue managers, should be careful about the quality of the accounts and audit of the interested companies.

“An investor makes investment decision seeing the accounts and audit of a company. So, it should be transparent and credible,” he said, adding that if anybody abuses it, they should be punished by the regulator.

Source: The Daily Star, 30 December, 2010

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