Move to bring quality IPOs

| Updated: January 26, 2019 10:19:46

Move to bring quality IPOs

The stakeholders have moved jointly to bring 'quality' IPOs (initial public offering) for enhancing the depth of the country's capital market.

As part of joint move, they will fix a work plan identifying the reasons behind the unwillingness of the companies having good fundamentals to go public.

In this regard, the representatives of DSE Brokers Association of Bangladesh (DBA) and Bangladesh Merchant Bankers Association (BMBA) held a meeting on Wednesday at BMBA office.

Mohammed Nasir Uddin Chowdhury, managing director at LankaBangla Capital Market Operations, chaired the meeting attended by DBA President Md. Shakil Rizvi and other representatives of both the associations.

Experts repeatedly had stressed on quality IPOs to increase the depth of the country's capital market.

In January last, the chairman of the securities regulator warned merchant banks of 'scrapping' their IPO quota if they fail to carry out stipulated roles in bringing IPOs.

As per Wednesday's decision, a 12-menber body will be formed comprising the representatives of DBA and BMBA for preparing work plan on quality IPOs.

Later, both the associations will sit with the regulatory bodies including the Bangladesh Securities and Exchange Commission (BSEC) to implement their plan.

DBA President Md. Shakil Rizvi told the meeting that the chaotic environment observed at many companies' annual general meetings (AGMs) is one of the reasons that discourages a company to go public.

"The chaotic situation created at the AGM by few rouge persons is a matter of discomfort for many decent sponsor-directors of listed companies. Considering this issue, many companies having good fundamentals lose interest to go public," Shakil Rizvi said.

He also said the securities regulator will have to ensure disciplinary environment at the AGMs of the listed companies.

Others said some companies are not willing to go public as they prefer hiding financials.

Mohammad Ali, CEO at Dhaka Bank Securities, stressed on a mandatory provision of offloading shares by a company if its annual turnover exceeds a certain limit.

"A company willing to go public get due-diligence certificate from the issue manager. A third party should provide due-diligence certificate to avoid conflict of interest," Ali told the meeting.

The DBA representatives said the expansion plan of an issuer company is affected if its IPO is not okayed within expected timeframe.

"Sometimes, one to three years are required to get the regulatory approval to an IPO proposal. But an IPO is approved within ninety days in the neighbouring country," the participant told the meeting.

Other participants stressed on tax incentives including the reduction of VAT for inspiring the listing of companies of large business groups.

A participant told the meeting that the offloading of shares by a state-owned enterprise (SoE) should not be inspired if its revenue is reduced following the decision of concern ministry.

In this regard, he said earlier the capital market was affected badly following the reduced revenue incurred by Titas Gas Transmission & Distribution Company. The company's revenue declined as the distribution charge was reduced.

The work plan of DBA and BMBA will also include the proposals of easing the trades of rights shares and restoration of trading of treasury bonds in the secondary market.

Khairul Bashar Abu Taher, general secretary of the BMBA, said the representatives of BDA and BMBA will also sit with the central bank to settle some pending issues including the revising of bank's exposure to the capital market.

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