Number of active BO accounts down due to revised IPO rules

The number of active BO (beneficiary owner's) accounts has marginally declined in the outgoing fiscal year (FY) 2016-17 compared to the previous FY.
The officials of some brokerage houses said the number of accounts has declined as the general investors' IPO (initial public offering) quota was reduced in the revised public issue rules.
According to information of Central Depository Bangladesh Limited (CDBL), on June 30, 2017 the number of active BO accounts has stood at 2,926,932, which was 3,153,442 as of June 30, 2016.
A senior official of a leading brokerage firm said a significant number of BO accounts are opened by general investors mainly to apply for IPO shares.
"The revised public issue rules has reduced general investors' possibility of getting IPO shares as the quota of institutional investors has been expanded. That's why the number of BO accounts declined in the outgoing FY," the official pointed out.
He said hardly 10 per cent BO accounts opened in his firm are used for share trading in the secondary market.
"The remaining accounts are used to apply for IPO shares. The reduced possibility of getting IPO shares is the main reason of declining BO accounts," the official added.
Under the revised fixed price method, general investors are eligible to apply for 50 per cent shares of a company willing to go public. The eligible institutional investors (EIIs) are allowed to apply for remaining 50 per cent shares.
Previously, the general investors were able to apply for 80 per cent shares under the fixed price method.
Under the revised book building method, the EIIs are eligible to apply for 60 per cent shares, NRBs for 10 per cent and general investors for remaining 30 per cent.
Of 2,926,932 active accounts, males own 2,131,076 accounts, females own 784,358 accounts and remaining 11,498 accounts are maintained by companies, according to the CDBL.
According to residence-wise information, 2,758,035 BO accounts are opened by residents, while non-resident Bangladeshis opened 157,399 accounts.
In the FY 2016-17, the IPO flow declined compared to the previous FY 2015-16.
The number of BO accounts reached the highest peak with around 3.4 million in March, 2011 as people rushed to open accounts with different brokerage houses lured by the booming share prices, especially from October to early December, 2010.
In the FY 2016-17, six companies and three mutual funds raised an aggregate amount of capital worth Tk 3.27 billion, which was 61 per cent or Tk 5.31 billion less than the amount of fund raised in the FY 2015-16.
Of the companies which went public in 2016-17, Yeakin Polymer raised a capital worth Tk 200 million, Fortune Shoes Tk 220 million, Shepherd Industries Tk 200 million, Pacific Denims Tk 750 million, Nurani Dyeing & Sweater Tk 430 million and BBS Cables Tk 200 million.    
These companies witnessed moderate subscription ranging 21 times to 54 times compared to their offered shares.
Yeakin Polymer's IPO subscription hit 44.55 times high, while Fortune Shoes 42 times high, Shepherd Industries 54 times high, Pacific Denims 21 times high, Nurani Dyeing & Sweater 28 times and BBS 48 times high.
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