Primary share market making turnaround

Twelve companies have raised funds from the stock market through initial public offerings (IPOs) within the first seven months of this calendar year, which indicates that the investors shocked by the past crisis are now getting back to the primary market.
The number is highest in the last four years since 2010, so far. In 2010, a total of 23 companies raised a total fund worth Tk 35 billion through IPOs. The figure was 14 in 2013 with a value of Tk 8.33 billion.
IPO trading had been sluggish since December 2010 when the market boomed and then doomed as, market analysts observe, the regulator tried to limit new issues. However, in 2013 it gathered some pace.
"The investors are showing appetite in the primary stocks and the regulator is approving two IPOs every month by taking the present market situation into account," said a Bangladesh Securities and Exchange Commission (BSEC) official about a turnaround.
According to stock-market data, a total of 12 companies raised a fund worth around Tk 6.68 billion through IPOs, including premium of Tk 3.63 billion, within this period.
The companies are: Emerald Oil Industries, Matin Spinning Mills, Hwa Well Textiles, FAR Chemical Industries, The Peninsula Chittagong, Shajibazar Power Company, Khulna Printing & Packaging, Tung Hai Knitting & Dyeing, Shurwid Industries, Far East Knitting & Dyeing, Saif Powertec Ltd and Ratanpur Steel Re-rolling Mills, according to statistic from the Dhaka Stock Exchange (DSE).
Six of the companies took premium. Matin Spinning Mills took a premium of Tk 27, Peninsula Chittagong Tk 20, Shahjibazar Power Tk 15, Far East Knitting & Dyeing Tk 17, Saif Powertec Tk 20 and Ratanpur Steel Re-rolling Mills took a premium of Tk 30 against a ten-taka share.  
Of the total 12 securities that raised capital from public subscriptions, six companies have already been listed with Dhaka bourse.
Meanwhile, Western Marine Shipyard and Khan Brothers PP Woven Bag Industries are set to raise funds through IPO from August 10 and August 24, 2014 respectively.
Western Marine Shipyard will raise a fund worth Tk 1,575 million from the public, including a premium of Tk 25 each ten-taka share, while Khan Brothers PP Woven Bag Industries will raise Tk 200 million from the public.
The investors who suffered losses due to debacle on the market in 2010 and 2011, however, blamed the securities regulator for approving IPOs with high premiums. They requested the market regulator to approve IPOs without premium.
"High premium made investors unwilling to apply for many companies' IPO," said one analyst, adding that investors showed less interest in high- premium IPOs.
Akter H Sannamat, managing director of the merchant bank Union Capital, said: "If a company is good, it can be permitted even with premium. But if the fundamentals are weak, it should not be allowed even with the face value."
The more the investors have access to fundamentally strong securities, the lesser will be the rush to purchase junk shares, said Mr Sannamat, also vice- president of Bangladesh Merchant Bankers Association (BMBA).
He, however, said the merchant banks which act as issue managers should be careful about the quality of the accounts and audit of the interested companies.
"An investor makes investment decision seeing the accounts and audit of a company. So, it should be transparent and credible," he said about fair and square deals in securities business.   
He pleaded that if anybody abused the rules of the trade, they should be punished by the regulator.
Meanwhile, around 40 companies are awaiting the regulator's nod to go public under fixed-price method and the remaining two companies under the book-building method, sources at the BSEC said.
Among the proposed IPOs are mostly small-cap companies particularly from textiles, power, pharmaceutical, real estate, insurance, engineering and cement sectors.