Dhaka bourse's faulty IPO list confuses market investors

Investors are kept in the dark about upcoming IPOs (Initial public offerings) for reasons unknown.

The premier bourse, Dhaka Stock Exchange (DSE) -- is the primary access point for investors to plan future investments in IPOs. According to its website, there are 12 IPO proposals but the securities regulator, which is the ultimate regulatory body to approve IPOs, told The FE that only one IPO remains in the pipeline. The remaining 11 proposals have already been rejected.

The DSE said it was yet to receive formally any information on the matter from the Bangladesh Securities and Exchange commission (BSEC), which was why the list was kept unchanged.

But there are developments to make the point that the prospective issuers are well aware about the rejection of their IPO proposals.

For example, Omera Petroleum sought permission to float primary shares in the stock market a few years ago.

Recently, one of the listed companies, MJL Bangladesh has declared that it will purchase 75 per cent shares of Omera Petroleum by investing Tk 605 million.

MJL Bangladesh and Omera Petroleum belong to the same business group. The former's decision to purchase shares of the latter indicates that the IPO has already been formally rejected.

But the DSE keeps Omera Petroleum on the list of upcoming IPOs.

Sources in the BSEC told The FE that they had rejected the IPOs in the interest of investors over violation of rules, non-compliance and on suspicion of inflated earnings.

Another company that failed in its attempt to list is Borak Real Estate Limited.

Its IPO was rejected in November 2024. The company wanted to raise Tk 4.0 billion by issuing primary shares but the securities regulator identified inflated financial results.

What was worrisome to the regulator was the company's abrupt fair value gain of Tk 7.0 billion, shown in its financial statement for FY23, which caused an additional income of Tk 6,525 million on top of its operating profit in the year.

Without the revaluation, its net asset value (NAV) would have been only Tk 85.20 per share and EPS Tk 4.62 for FY23. The revaluation drove the NAV to Tk 148.54 per share and EPS to Tk 65.25 for the year.

Similarly, IPOs of Digicon Technologies, Eshana Non Woven Fabrics, Protective Islami Life Insurance, Alliance Finance, Anik Trims, Three Angle Marine Limited, and Rhymer Chemical Industries Limited have been rejected by the market watchdog.

Only Dhakathai Alcomaxx is still awaiting approval.

Experts say the DSE should update the list to better inform investors.

Some market insiders said the BSEC is currently avoiding IPOs as there are criticisms over previous bad IPOs while new companies are not considering public listing against the backdrop of a volatile market and liquidity crisis.

Ideally, companies willing to list must select an issue manager and prepare the documents and submit an application to the BSEC.

The application includes details, such as business overview, financials, IPO size and structure and risk factors.

The BSEC may seek additional clarifications or corrections. If satisfied, it allows a company to proceed with its plan.

However, the regulatory body now considers direct listing of financially-strong companies to increase the number of good, investable stocks.

farhan.fardaus@gmail.com