The securities regulator has set some code of conduct for eligible investors (EIs) in the bidding process to ensure 'justified' price of IPO (initial public offering) shares under the book building method.
In this regard, the Bangladesh Securities and Exchange Commission (BSEC) Tuesday issued a directive signed by its chairman Prof. M Khairul Hossain.
The regulator asked the EIs to take into consideration all aspects including financial, technical, managerial, commercial, economic, ownership etc. of the securities offered and its issuer.
The directive was issued in the backdrop of quoting prices for IPO shares without 'justification' in recent times.
The BSEC also approved the IPO proposal of SK Trims & Industries on Tuesday. The company will raise Tk 300 million from general public under fixed price method.
As per the BSEC directive, the Els will have to form a bidding recommendation committee comprising of atleast two members having relevant knowledge, skill, qualification and experience.
"The committee, after detailed analysis of value and prospects of the securities, shall recommend to participate in the electronic bidding and shall also mention the bidding quantity and price, if recommended," the BSEC directive said.
Based on the recommendation of the bidding recommendation committee, the EIs will take decision about participation in the bidding.
"Decision of the Els and proceedings of the committee along with workings shall be preserved for inspection by the commission or the exchanges," the BSEC said.
The regulatory directive said the Els and committee shall exercise due diligence and independent professional judgment, and ensure proper care in order to maintain objectivity, transparency and independence in the decision making for bidding.
"While analyzing, they shall take into consideration all aspects including financial, technical, managerial, commercial, economic, ownership etc. of the securities offered and its issuer and review all documents and prospectus thoroughly," the BSEC directive said.
While analyzing, they shall use internationally recognized securities valuation techniques and take decision on objective and professional judgment, the BSEC said.
"They shall keep all calculations, analysis, workings and proceedings regarding the valuation in writing and shall record the basis for using valuation technique with justification."
The BSEC asked EIs to act fairly, neutrally, honestly and independently while analysis and making decision without any influence, interference or pressure.
"The analysis, recommendation and decision shall be kept confidential till completion of the bidding period."
The Els will have to submit their valuation report along with workings and calculations to the exchange conducting the bidding, within two working days of completion of the bidding period.
"The exchange conducting the bidding shall report to the commission, within seven working days of completion of the bidding period, if they have any observation or find any discrepancy regarding the valuation reports," the BSEC directive added.
Under the fixed price method, SK Trims and Industries will offload 30 million ordinary shares at an offer price of Tk 10 each for raising Tk 300 million.
The company will utilise the IPO fund for purchasing machineries, constructing building and bearing the IPO expense.
According to financial statement for the year ended on June 30, 2017 the company's net asset value (NAV) per share is Tk 12.79.
The weighted average of earnings per share (EPS) of last three years is Tk 1.31.
Imperial Capital and BMSL Investments are working as issue manager of SK Trims and Industries.
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