Babul Barman
Eight companies, mostly small ones, and three mutual funds (MF) raised an aggregate amount of Tk 8.49 billion through initial public offerings (IPOs) in the outgoing calendar year.
Market insiders attributed the slow pace of collecting funds through IPOs to the revised Public Issue Rules, which compelled many issuer companies to revise their IPO proposals.
The companies which raised funds through floating IPOs are Dragon Sweater and Spinning, Doreen Power Generations and Systems, Bangladesh National Insurance Company, Evince Textiles, ACME Laboratories, Yeakin Polymer, Fortune Shoes and Pacific Denims.
Of them, seven companies collected Tk 2.50 billion through floating IPOs using the fixed price method, while one company - ACME Laboratories- raised Tk 4.09 billion using the book building method.
Book-building is a process through which an issuer attempts to determine the price to offer for its security by gauging the demand from institutional investors.
Of the companies, Dragon Sweater collected Tk 400 million, Doreen Power Tk 580 million, including Tk 380 million as premium, Bangladesh National Insurance Company Tk 177 million, Evince Textiles Tk 170 million, ACME Laboratories above Tk 4.09 billion, including Tk 3.95 billion as premium, Yeakin Polymer Tk 200 million, Fortune Shoes Tk 220 million and Pacific Denims raised Tk 750 million.
Three mutual funds which collected fund are: Vanguard AML Rupali Bank Balanced Fund, CAMP BDBL Mutual Fund One and SEML IBBL Shariah Fund.
Vanguard AML Rupali Bank Balanced Fund collected Tk 950 million, CAMP BDBL Mutual Fund One Tk 700 million and SEML IBBL Shariah Fund raised Tk 250 million from the public.
In 2015, nine companies and three mutual funds (MF) raised an aggregate amount of Tk 8.31 billion from the public through IPOs, the DSE data shows. Experts and stakeholders said collecting funds through IPOs from the capital market is still slow.
They said making the secondary market vibrant was one of the key requirements for creating scope for new companies to raise fund through IPOs.
Some issue managers told the FE that the number of IPOs is not satisfactory due to sluggish market trend as well as revision in Public Issue Rules.
"The securities regulator's conservative policy in approving IPOs, procrastination, higher IPO costs and entrepreneurs' reluctance to go for market exposure held back the primary market," said an issue manager, seeking anonymity.
He said the companies having good fundamentals should be allowed to enter into the market to increase its depth.
However, he said many companies having better fundamentals are not interest to float shares in the capital market for different reasons.
Md Ashaduzaman Riadh, strategic portfolio manager of LankaBangla Securities, said, "The revised public issue rules compelled many issuer companies to revise their IPO proposals, which is a major reason for slow trend of IPOs in the outgoing calendar year".
In December 2015, the securities' regulator made the use of book-building method mandatory for the companies willing to offer their primary shares with premium, according to the revised IPO rules.
Only the companies interested to offer their stocks at face value will be allowed to float IPOs under the fixed price method.
Later, many companies, which submitted IPO proposals to go public with premium under the fixed price method, were asked to revise their proposals for going public under book-building method.
The IPO market was sluggish since the beginning of 2010 when the market boomed and then doomed as the regulator has tried to limit new issues.
However, the year 2014 was a bonanza year after three years of drought. A total of 20 IPOs raised around Tk 13.72 billion from the public, including premium.
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