BSEC urged to ease IPO fund rules for bank loan repayment

FE Report
Entrepreneurs and bank owners have urged the securities regulator to remove restrictions in the revised IPO rules on the repayment of loans using funds raised through initial public offerings.
Under the revised rules that came into effect last December, a maximum of 30 per cent of IPO proceeds may be used to repay outstanding loans taken for any project or BMRE (Balancing, Modernisation, Rehabilitation and Expansion) purposes, subject to an auditor's report on the proper utilisation of such funds.
However, the rules do not allow the repayment of classified loans or the rescheduling of non-performing loans using IPO funds.
At a meeting held on Thursday at the Bangladesh Securities and Exchange Commission (BSEC), market stakeholders called for leniency in allowing the repayment of bank loans with IPO proceeds, according to a press release issued by the BSEC.
They demanded that IPO funds be allowed to repay loans that have been regularised through rescheduling, the press statement said.
Managing Director of Apex Footwear, Syed Nasim Manzur, was quoted in the statement as saying that other countries, including neighbouring India, do not impose such restrictions on repaying bank loans with IPO funds.
"Considering the global standards, the scope of repaying bank loans with IPO funds can be widened," Mr. Manzur said.
Mashrur Arefin, chairman of the Association of Bankers, Bangladesh (ABB), said capital restructuring should be allowed through the repayment of bank loans taken for business expansion.
Tapan Chowdhury, managing director of Square Pharmaceuticals, expressed a view that differed from those of others.
He said many large and renowned groups might have undertaken ambitious projects with little possibility of being implemented. "The repayment of loans with IPO funds for those ambitious projects will not be rational in consideration of the groups' reputation only."
Riad Mahmud, president of the Bangladesh Association of Publicly Listed Companies (BAPLC), said even good companies might incur losses and be forced to reschedule loans amid global economic turmoil.
Therefore, the repayment of such loans should be allowed considering the situation.
Mominul Islam, chairman of the Dhaka Stock Exchange (DSE), said loan repayment with IPO funds is in the interest of companies' beneficiaries. "However, there should be scrutiny."
Responding to the requests, BSEC Chairman Khondoker Rashed Maqsood said at the meeting that the regulator needs support from all stakeholders to regulate the market. At the same time, it must protect the interests of investors.
Abdul Hai Sarker, chairman of the Bangladesh Association of Banks (BAB) and Dhaka Bank, said a strong and developed capital market is key to economic growth.
Chittagong Stock Exchange (CSE) chief AKM Habibur Rahman, President of DSE Brokers Association Saiful Islam, and Managing Director of Dhaka Stock Exchange Nuzhat Anwar, among others, were present at the discussion.
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