Listing of state-run entities: Efforts renewed to make use of slim chance

The Investment Corporation of Bangladesh and the Dhaka bourse have renewed efforts for the listing of state-run enterprises (SoEs), an issue that is dragged out of the forgotten stuff every now and then but to no avail.

In the latest attempt prompted by the prime minister's insistence at a recent programme that SoEs be listed in the stock market, the Dhaka Stock Exchange (DSE) has sought permission of the secretary of the Finance Division to hold a conference to draw attention to the opportunities that the equity market will offer to SoEs.

The PM had given such an instruction even after the 2010 stock market debacle but there has been no progress in more than a decade in this regard due to some underlying challenges gone unaddressed. Unless the problems are solved, some of which only intensified with time, the entities will not be able to go public, according to insiders.

Huge foreign debt burden, negative retained earnings, and large paid-up capitals are major barriers as most SoEs for one or more of the reasons will find it difficult to pay good dividends after listing. Companies having negative retained earnings do not even qualify for stock market listing.

The government on several occasions has provided companies, especially those of the power and energy sector, with equity money, considering the urgency to increase electricity generation. Subsequently, their paid-up capitals expanded significantly following the issuance of shares against the funds.

However, instead of receiving government funds the organisations could raise capital from public investors. In that way, the government would have lessened the burden of financing such entities. At the same time, the companies would have had to ensure good governance as listed companies are obligated to publish financial statements and explain different decisions.

Some of the targeted SoEs have no operating profits as the pricing of gas and electricity are determined by the government. They are dependent on non-operating incomes.

This is the backdrop against which the DSE looks to boost investment knowledge of those, who make decisions on behalf of the SoEs, provide insights into risk management, discuss portfolio diversification strategies, and emphasise the importance of governance.

"We are talking to the top officials of the ministry about how to execute the prime minister's order to improve the depth of the capital market," said ATM Tariquzzaman, a newly-appointed commissioner of the Bangladesh Securities and Exchange Commission.

The decision makers from the SoEs have been resisting attempts for public listing since the funds, which will be raised from the primary market, will be deposited into the government's accounts.

On receiving consent of the ministry, the DSE will hold a conference to be attended by top officials of the ministries and departments concerned. ICB Capital Management, which plays the role of issue manager for SoEs, is likely to hold another programme.

Some state-run companies, Sadharan Bima Corporation and Jibon Bima Corporation for example, are in a good position to go public.

ICB Capital Management has been trying to convince the organisations to float shares in the equity market. It earlier signed agreements with three firms, including Gas Transmission Company and BR Power generation, as their issue manager.

Ms. Mazeda Khatun, managing director of ICB Capital Management, is optimistic about the positive outcome of their efforts.

Some of the state-owned companies issued sovereign bonds and the issue manager -- ICB Capital Management -- is yet to be clear about whether such companies have any legal restriction on offloading shares in the market.

Such ambiguities should be removed to execute the plan.

Listed SoEs' business performance

Meanwhile, state-run listed companies' poor performance does not hold out any hope of a better market situation if non-listed ones get listed.

Currently, 22 state-run entities are listed in the stock market and half of those have been incurring losses for many years mainly due to a lack of good governance and proper policies.

A handful of the firms that enjoy monopoly in business are booking profits. But the ones having to navigate a competitive environment are in the red. They include companies founded to produce sugar, motorcycles, cables and glass sheets, and provide hotel services.

The oil & petroleum marketers sustained their profit growth.

A big number of listed state-run companies have also not been giving any dividends to shareholders for many years.

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