Thirteen companies, mostly small ones, and one mutual find raised an aggregate amount of Tk 5.71 billion by floating IPOs in the outgoing fiscal year.
Fundraising by companies through initial public offerings (IPOs) rose 5.54 per cent year-on-year in the FY 2018-19 compared to the previous fiscal, according to data from the Dhaka Stock Exchange (DSE).
In the FY 2017-18, nine companies and two mutual funds raised a total of Tk 5.41 billion through IPOs, the DSE data shows.
The companies followed two methods -- fixed price and book-building -- in issuing IPOs.
Two companies -- Esquire Knit Composite and Runner Automobiles -- used book-building method.
Companies that intend to offer primary shares with premium prices followed the book building method to raise capital from public.
Eleven other companies that raised funds using fixed-price method were VFS Thread Dyeing, ML Dyeing, Silva Pharma, Indo-Bangla Pharma, Kattali Textile, SS Steel, Genex Infosys, New Line Clothings, Silco Pharma, Coppertech Industries and Sea Pearl Beach & Resort. One mutual fund was SEML FBLSL Growth Fund.
Most of the funds, raised through IPOs, were meant for business expansion, repayment of loans, and supporting working capital requirements.
However, most of the companies that issued IPOs in the outgoing fiscal year were little known and fundamentally weak.
The primary market was vibrant in the first half of the outgoing fiscal while the investors' interest dried up in the second half of FY19 as they lost confidence over the market.
The pricing of new securities in the secondary market was not so attractive for investors, as the market has been on a downward trend.
Market analysts also identified dearth of quality IPOs in the market as a major reason behind the existing low investor confidence to the market.
The market regulator recently stayed away from giving IPO approval to new companies and took step to tighten the IPO approval system.
For the last time, on March 12, the BSEC gave consent to Ring Shine Textiles to raise Tk 1.50 billion under the fixed price method.
On April 29, the Bangladesh Securities and Exchange Commission (BSEC) unveiled the reform measures.
The regulator also approved a draft proposal regarding amendment to public issue rules. The commission will seek public opinions on the rule change.
According to the proposals, the IPO quota facility for the general investors would be raised to 50 per cent from the existing 40 per cent under the fixed price method of IPO and it would be increased to 40 per cent from the current 30 per cent under the book building method.
The quota facility of eligible investors would be cut to 50 per cent from the existing 60 per cent under the book building method while it would be reduced to 30 per cent from the current 40 per cent under the fixed price method.
The size of the public issue under the fixed price method must be minimum Tk 500 million or 10 per cent of the company's paid-up capital, whichever is higher.
The size of the IPO under the book-building method must be at least Tk 1.0 billion or 10 per cent of the company's paid-up capital, whichever is higher.
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