IPO funds at decade-high on Bangladesh's economic recovery


Spurred by economic-recovery hopes, initial public offerings in the outgoing calendar year will climb to a decade-high amount of Tk 12.33 billion, including premium, as moves are on to woo blue chips into bourses.

Sources say last three IPOs of 2021 will take the funds to this total.

The last three IPOs ---- Union Insurance, Union Bank, and BD Thai Food & Beverage - will raise funds between December 15 and December 30.

Battered by the Covid-19 pandemic, market-insiders said, the companies raised such a huge amount of funds on expectations that it might help stimulate their business strengths in the ongoing economic recovery.

But experts say the number of companies with good fundamentals and large sizes is now insufficient to stabilize the market by averting fluctuations.

Most of the fundraising took place in 2021 for the purpose of business expansion, repayment of loans and meeting the working- capital requirements, according to their prospectus.

The companies followed two methods in issuing the IPOs: fixed-price and book-building methods.

Former chairman of the securities regulator Faruq Ahmad Siddiqi thinks the market will not be stable unless a good number of companies having sound fundamentals are brought into the market.

"No artificial support will able to make the market stable if the companies having poor fundamentals are listed," Mr Siddiqi says.

He says there are many good companies which are yet to be listed with the stock exchanges.

"Those companies should be convinced for offloading shares for the sake of the market's stability," Siddiqi suggests.

Three companies which raised funds under book-building method are Lub-rref (Tk 1.50 billion), Index Agro Industries (Tk 500 million), and Baraka Patenga Power (Tk 2.25 billion).

Eight companies raised funds using fixed-price method -- eGeneration (Tk 150 million), Taufika Foods (Tk 300 million), NRB Commercial Bank (Tk 1.20 billion), Desh General Insurance (Tk 160 million), Sonali Life Insurance (Tk 190 million), South Bangla Agriculture & Commercial Bank (Tk 1.0 billion), Sena Kalyan Insurance (Tk 160 million), ACME Pesticides (Tk Tk 300 million).

Besides, Union Insurance (Tk 193.60 million), Union Bank (Tk 4.28 billion), and BD Thai Food & Beverage (Tk 150 million), are set to raise funds this month.

Union Bank is set to raise Tk 4.28 billion from the public, which will be the largest IPO from the banking sector. Among all sectors, it will be the fourth-largest IPO after Robi Axiata (Tk 5.23 billion), Grameenphone (Tk 4.86 billion) and MJL Bangladesh (Tk 4.60 billion), according to DSE data.

BSEC chairman Prof Shibli Rubayat Ul Islam says the job of bringing quality IPO does not lie with the securities regulator.

"It's the job of stock exchanges and merchant bankers. Sometimes, we are to intervene in such jobs amid reluctance of the market operators," Mr Islam said.

Nevertheless, the securities regulator has laid its efforts to accelerate the jobs of the market operators, the chairman said.

"We have asked many SoEs to offload shares. We hope more good companies will go public in 2022," says the BSEC chairman on a note of optimism.

Meanwhile, the securities regulator and Dhaka Stock Exchange (DSE) have taken separate initiatives to increase the listings of good companies, including state-owned enterprises (SoEs).

The premier bourse, DSE, will sit with some 80 business groups, including top ones, on December 21 to encourage them to go for offloading shares.

The business groups, including Akij, Transcom, Bashundhara, PHP, Jamuna, Meghna, City Group, United, Rahimafrooz, Incepta, Kazi Firms and Bengal Group, are expected at a conference to be held on December 21.

On the other hand, the Bangladesh Securities and Exchange Commission (BSEC) Thursday asked 17 SoEs having good fundamentals to go public.

Market operators say IPO-approval process got faster after the new commission led by Prof Shibli Rubayat Ul Islam took over in May last year.

Managing director of IDLC Investments Md. Moniruzzaman said most of the companies, other than few ones, which went public in 2021, were not enough to support the market based on their sizes and fundamentals.

"Companies will not be interested to go public on a large scale unless their corporate-governance level is improved," said Mr Moniruzzaman, also the vice president of Bangladesh Merchant Bankers Association (BMBA).

He feels that the regulators and the government agencies can facilitate the improvement in the companies' corporate governance.

Some market experts say the regulator should be cautious about the unscrupulous companies that tend to take advantage of relaxed IPO rules and regulations. They suggest doing proper valuation and scrutiny of the IPO proposals before approval.

With the inclusion of the new issues, the market capitalisation of the prime bourse also soared to an all-time high at Tk 5,863 on September 9, 2021.

In 2020, eight private companies raised an aggregate amount of Tk 9.85 billion, including premium, by floating IPO shares, the DSE data showed.

The largest-ever IPO listing with the country's capital market -- Robi Axiata - also raised over Tk 5.23 billion in 2020.

However, fundraising through IPO listings in 2011 was the highest -- Tk 16.78 billion -- since the stock market debacle in 2009-10.

[email protected]

[email protected]