IPO proposals unlikely for 5 more months under revised rules

A new IPO (initial public offering) proposal is unlikely for at least another five months under the revised public issue rules.

Companies are allowed to submit IPO proposals with audited financial statements for a fiscal or calendar year, or with audited quarterly or half-yearly statements. However, enterprises usually submit proposals with audited annual financial statements.

The new IPO rules came into effect on December 30 last year. No company has yet submitted any proposal to issue primary shares using audited financial statements for the calendar year 2025.

As per the revised public issue rules, a company is allowed to submit a proposal within 120 days from its year-end. Hence, the deadline for companies that follow the calendar year will be April 28.

Talking to The FE, an issue manager, wishing to remain unnamed, said there is little possibility of an IPO proposal being submitted before the deadline.

Upon completion of a year, it takes at least one month for a company to prepare its annual financial statement. The statement is then audited and subsequently approved by the company's board of directors. Overall, it requires at least two months from preparing a financial statement to receiving approval of the audited statement.

"It's not possible to get financial statements audited within a month," said Sumit Podder, secretary general of the Bangladesh Merchant Bankers Association (BMBA).

In that case, a company willing to submit an IPO proposal with audited financial statements for FY26 will have to wait at least another five months.

Previously, the time between IPO proposal submission and regulatory approval was unnecessarily lengthy. In some cases, it took more than one year to obtain regulatory approval for an IPO proposal.

Under the revised rules, separate timeframes have been set for stock exchanges, issue managers, and securities to complete their tasks in the IPO process.

The Bangladesh Securities and Exchange Commission (BSEC) will take a maximum of 20 days to accept or reject an IPO proposal under the fixed price or book-building method, based on recommendations from the stock exchanges.

The entire process of approving or rejecting an IPO proposal must be completed within 20 days under the fixed price method, and within 53 days under the book-building method.

The revised public issue rules also allow companies to demand higher premiums if their fundamentals are strong.

The previous public issue rules were criticised by stakeholders and issuer companies for not facilitating fair valuation due to a cap on pricing.

The BSEC amended the rules after taking opinions from experts, issuer companies, and market operators.

Factors that previously hindered listing and delayed the IPO approval process have been addressed in the new rules. The revised rules also allow more than one IPO valuation method.

Nevertheless, no company has yet submitted any IPO proposal under the revised mechanism.

Mr Podder said most companies are facing financial hardships amid macroeconomic concerns.

"They are yet to overcome the impacts of the economic slowdown on profits, which play an important role in IPO valuation. A company will not be keen on going public unless it experiences profit growth."

The country's capital market saw its last IPO proposal from Techno Drugs in March 2024. Since then, no new company has entered the secondary market.

mufazzal.fe@gmail.com