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Why are private companies not being listed?

Sunday, 12 December 2010


Jahangir Hossain
It is now a prime concern of all -- the regulatory body, policy makers or investors -- to increase the supply of share in our capital market for cooling down its overheated condition. It is not very much difficult to understand what is indispensable and needs to be done immediately. To minimize the supply-demand mismatch, more shares are needed in the market. In daily newspapers or in talk-shows, our mentors suggested measures in the same tune. According to them, everything is now going in vain for a 'dilly-dally' attitude.
In most cases, it is stated that the government officials lack in knowledge about capital market and thus they show the reluctance to offload the government shares. Despite all these, it is a praiseworthy move to off-load the government shares. This will certainly assuage the investors. But is it the only solution to rein in this market? What will happen if the conditions after a time beings remain same as it is now? All the hue and cry will then, be noticed again, as usual.
There are many private limited companies in the country whose paid-up capital is very minimum. But they are making hefty profits by taking loans which are many times of their paid-up capital. So the opportunities that they are now enjoying, must have some liabilities also. Only paying some donation for the sake of corporate social responsibility (CSR) is not does not mean any discharge of their responsibility towards the society. This is the right time to bring change in their attitude.
Roundtable discussions can be organised to make them more aware of it. Meanwhile, the Securities and Exchange Commission (SEC) has effected some time-befitting prudent changes by relaxing the listing criteria, again. As the government is very much conscious about the imperatives for a healthy growth of the capital market, more pro-action rules can be enacted such as declaring tax holiday facility, reducing tax rate further, etc., for the companies in order to persuade them to be listed with the bourses. If it fails, then some strict rules i.e. imposing restrictions on their loan-taking facility relative to their paid-up capital etc., do need to be put in place so that the owners of the such companies appreciate themselves the benefits of going public and, thereby, are encouraged to enlist their respective company in the capital market. On the other hand, some multinational companies are also doing lucrative business in the country. Even in India it is not so easy to run their business so smoothly. So a type of regulations must be considered so that they give up their their reluctance to dilute a part of their equity in the domestic capital market.
Most rules and regulations that have recently come in relation to the country's capital market, have not demonstrated any qualitative change, in essence. Rather, many farcical decisions have been taken. This has caused more chaos and benefited some particular groups in their respective fields of business in the process. Allowing the denomination of all shares at Tk 10 is only a example as a tip of the iceberg of the anomalies. Uniform denomination of share value is otherwise a welcome move to bring about consistency and to make it easy for the investors to take their investment decision. But this denomination value should be of Taka 100 instead of Taka 10. Does it convey any realistic view when we have to take, a places, a cup of tea now-a-days at Taka. 10? After some time, this share value of Tk10 will not have any significant value. Then again, it will be required to change it (denomination value) into Tk 100. Another lucrative game of making money will then be facilitated as it has happened now.
It is pretty clear that the regulatory body is not free from influences of other power entities. The point to ponder is that this body has been set up to protect the investors' interest only. That is why its policies should be taken in the interests of the investors. Otherwise, the respected authority in this respectful organization will be liable for any untoward abrupt situation happening in the market as it did in 1996. There should be no bias whatsoever, while formulating policies, rules and regulations in order to make the base of our capital market strong, disregarding all other interests.
We have high expectations about policy-makers because they are otherwise experienced, knowledgeable and qualified persons in our capital market. Our nascent capital market should be nurtured towards maturity in a successful manner. This is our desire. Our regulatory body, we believe, is good enough to make that happen.
The writer who works with Investment Corporation of Bangladesh or ICB, can be reached at jahid69@yahoo.com