Fund raising through rights hits three-year low

Funds raised by listed companies through issuance of rights shares fell sharply by 76 per cent year-on-year in 2018, hitting three years low.

Two listed firms netted about Tk 2.68 billion by issuing more than 268 million rights at par in the outgoing calendar year, according to statistics available from the Dhaka Stock Exchange (DSE).

A rights issue is an issue of additional shares by a listed company to raise capital from existing shareholders.

With a rights issue, existing shareholders get the privilege to buy a specified number of new shares from the company at a particular price within a specified time.

The companies intended to issue rights shares to either strengthen their capital structure or use funds for business expansion and loan repayment.

Market insiders said securities regulator's go slow policy in giving approvals, insufficient documents and a downward trend in the secondary market were the major factors behind the significant fall of rights issue.

"The regulator was conservative in allowing listed companies to raise funds through rights shares, as a downward trend prevailed in the secondary market in the outgoing fiscal year," said an analyst at a leading brokerage firm.

The DSEX -- the prime index of DSE -- eroded more than 944 points or nearly 15.11 per cent between January 01 and December 24 this year.

LankaBangla Finance collected more than Tk 1.59 billion by issuing 159 million ordinary shares of Tk 10 each in the outgoing calendar year.

The leading non-bank financial institution issued one rights share against two existing shares at a price of Tk 10.

LankaBangla raised fund through rights to comply with the condition of BASEL-III.

Another company -- Alif Manufacturing Company-- collected Tk 1.09 billion through issuing more than 109 million rights shares.

The textile company issued one rights share against one existing share at par.

The purpose of the rights share issue of Alif Manufacturing, which was known as CMC Kamal Textile Mills, was to import capital machinery, factory building extension and BMRE of spare parts.

Meanwhile, the Bangladesh Securities and Exchange Commission (BSEC) in July last canceled the right share subscription of Zaheen Spinning, which was allowed to raise Tk 985.50 million from the capital market earlier.

In 2017, four listed firms raised around Tk 11.14 billion by issuing more than 868 million rights shares, with IFIC Bank accounting for half of the fund, the DSE data shows.

IFIC Bank raised nearly Tk 5.64 billion by issuing 564 million ordinary shares at par of Tk 10 each to strengthen capital base of the bank as per the requirement of Basel-III.

IDLC Finance raised Tk 2.51 billion through 125.68 million rights shares of Tk 20, including premium of Tk 10 each, IFAD Autos raised a capital worth Tk 1.24 billion through 62.19 million rights shares, Saif Powertec collected more than Tk 1.74 billion by issuing 116.29 million rights shares of Tk 15, including a premium of Tk 5.0 each.

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