BABUL BARMAN |
July 05, 2021, 9:24 a.m.
July 05, 2021, 9:52 a.m.
Private companies unloaded primary shares worth Tk 16.12 billion in the past fiscal year, the highest in more than a decade, against a backdrop of activity economic sluggishness induced by the virus.
With the latest from Baraka Patenga Power, the country’s capital market saw 16 Initial Public Offerings (IPOs) in the 2020-2021 fiscal year, significantly increasing market capitalization and increasing market depth.
Beaten down by the Covid-19 pandemic, insiders said, companies have raised such huge funds on expectations that it could help boost their business’s strength in the post-pandemic period.
Most of the funds are used to expand the business, repay loans and meet working capital needs. The market also saw the entry of the largest IPO ever – Robi Axiata – in the outgoing fiscal year.
However, fundraising through IPOs hit its lowest level in 11 years during fiscal year 2019-2020 due to strong criticism of the poor approval of IPOs by the Securities Commission. period and the market closure for 66 days (March 26 to May 30) due to the coronavirus epidemic.
Only two companies – Ring Shine Textiles and ADN Telecom and a bond Ashuganj Power Station Company – raised a total amount of Tk 3.07 billion in fiscal year 2019-2020, according to data available from the Dhaka Stock Exchange (DSE).
Companies have followed two methods – fixed price and book building – when issuing IPOs.
Six companies used the book-building method – Walton Hi-Tech Industries (Tk 1.0 billion), Energypac Power Generation (Tk 1.50 billion), Mir Akther Hossain (Tk 1.25 billion), Lub -rref (Bangladesh) (1.50 billion Tk), Index Agro Industries (500 million Tk) and Baraka Patenga Power (2.25 billion Tk).
Ten other companies raised funds using the fixed price method – Robi Axiata (Tk 5.23 billion), Dominage Steel Building Systems (Tk 300 million), Express Insurance (Tk 260.79 million), Associated Oxygen (150 million Tk), Crystal Insurance (160 million Tk) million Tk), Desh General Insurance (160 million Tk), eGeneration (150 million Tk), Taufika Foods and Agro Industries (300 million Tk), NRB Commercial Bank (Tk 1.20 billion) and Sonali Life Insurance (Tk 190 million).
Market traders said the IPO approval process accelerated after the new commission led by Prof. Shibli Rubayat Ul Islam took over as BSEC chairman in May last year. .
“We want to make the market dynamic by bringing in new issues with good fundamentals,” said Rezaul Karim, spokesperson for the Bangladesh Securities and Exchange Commission (BSEC) recently.
He noted that the new issues will strengthen the market as well as the economy.
Dr AB Mirza Azizul Islam, former adviser to the interim government, said making the secondary market vibrant was one of the key factors needed to create opportunities for new companies to raise funds through IPOs.
Mr Islam, also a former president of BSEC, said companies with good fundamentals and a good reputation should be allowed to be listed to deepen the market.
He also stressed the need for public enterprises to further strengthen the market and make it efficient.
Some market experts have said the regulator is cautious of unscrupulous companies that tend to take advantage of relaxed IPO rules and regulations. They suggested that an IPO proposals be evaluated and scrutinized before they are approved.
The country’s capital market also posted the highest return in a decade in the outgoing fiscal year despite the ongoing pandemic.
Between July 1 and June 30, the DSEX, the DSE’s benchmark, rose 2,161 points or 54% to 6,150 on June 30, the highest level in 41 months.
With the inclusion of the new issues, the market capitalization of the stock exchange premium also reached a record high of Tk 5,142 billion on June 30.
Through IPOs, companies raised Tk 5.71 billion in fiscal year 2018-19, Tk 5.41 billion in fiscal year 2017-18, Tk 3.90 billion during in fiscal year 2016-17, 8.58 billion Tk in fiscal year 2015-16, 13.07 billion Tk in fiscal year 2014-15, 6.52 billion Tk in FY2013-14 , Tk 7.08 billion in FY2012-13, Tk 1.47 billion FY2011-12, Tk 11.22 billion in FY2010-11 and Tk 13.98 billion in FY2009-10, according to data from the ESD.