Book-building method 'must keep shares for small investors, NRBs, mutual funds'

M Azizur Rahman

Small investors, non-resident Bangladeshis (NRBs) and the mutual funds will have specific quotas in shares of the potential corporate business houses planning to go public  through the proposed book-building system.

"The book-building method must have allocation of shares for the mutual funds, NRBs and small investors to entice   investors and keep the stock market vibrant," Securities and Exchange Commission Chairman (SEC) Faruq Ahmad Siddiqi told the FE in an interview.

He said: "I have already asked the concerned committee to prepare the book-building method keeping certain portion of the total floated shares for all those who now enjoy special quotas under the existing initial public offering (IPO) system."

As per the existing IPO floatation mechanism the mutual funds and the NRBs have special quotas of 10 per cent each out of the total public shares floated by companies.

Stock market sources said the mutual funds, especially the Aims first, Grameen one, ICB 1st NRB are now utilising their respective quotas due to their strong financial position.

The ICB 1st NRB mutual fund is utilising both the mutual fund and NRB quotas in getting IPO shares, they added.

The remaining 80 per cent shares of the total IPO are distributed to the small investors through lotteries against their beneficiary owners (BO) account.

Speaking further on the proposed book-building method Siddiqi said the SEC will implement the mechanism in such a manner that will suit the country's stock market and the economy.

"We don't like to copy the book-building method being pursued in other countries. We must have to implement it in our own way considering the depth of our stock markets," the SEC top brass said.

SEC sources said in most other countries the book-building method benefits the concerned business houses that floats shares.

The underwriters purchase shares of the respective companies at a certain rate and then sell those in the market at market rates there.

He said no specific quota is fixed there for mutual fund, NRBs or the small investors.

Managing Director and Chief Executive Officer (CEO) of the Aims of Bangladesh Yawer Sayed hailed the SEC chief's support for the country's mutual funds.

"I personally believe that the mutual funds would get larger number of shares in the book-building system compared to the existing IPO system," Sayed told the FE.

He said the mutual funds might get increased number shares through public placement in the book-building system by investing less than what they used to do under the IPO floatation system.

The Aims CEO also said that the net asset value and income of the country's mutual funds are growing rapidly after ensuring their quotas in the IPO system, which might grow further after implementation of the book building system.

The draft of the proposed book-building system has already been finalised, a senior SEC official said.

A technical committee constituted by the SEC is now scrutinising it before its final approval.

If approved, both the methods -- book building and IPO - will simultaneously be applicable for floating shares in the country's stock markets.

To avail of the book-building method for floating shares the interested business houses must have to fulfil certain criteria, which include strong capital base and sound business track record.