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ICB finalised deal to expand free float to 10pc

63.54m shares held by Pubali Bank to be sold at market price

MOHAMMAD MUFAZZAL | April 06, 2023 00:00:00

The state-run Investment Corporation (ICB) of Bangladesh has reached the final stage to increase its free float from 3.51 per cent to 10 per cent of the shares outstanding to comply with the public issue rules.

That entails selling of 63.54 million shares, currently held by Pubali Bank Limited, in the secondary market.

The Ministry of Finance held a meeting with the ICB and Pubali Bank Ltd about a couple of months ago to finalise the decision, said ICB Managing Director Md Abul Hossain.

The ministry asked the bank to offload the shares, he said, adding that the ICB has also sent a letter to the lender to execute the plan.

Free float are shares of a listed company available in the stock market for public trading; outstanding shares minus locked-in shares held by sponsor-directors, controlling-interest investors, government and other private parties.

The public issue rules require a public company to have 10 per cent of its outstanding shares as free float or public float.

In September 2021, the Bangladesh Securities and Exchange Commission asked three companies, including the ICB, to raise their free float shares up to 10 per cent within one year.

In doing so, it suggested offloading maximum 1 per cent of the required amount of shares every month so the companies could meet the target in one year. Two other companies are Berger Paints Bangladesh and Walton Hi-Tech Industries.

ICB's existing free float shares are held by institutions, 1.92 per cent, and general investors, 1.59 per cent, according to the data available until the end of November 2022.

Of the remaining 96.49 per cent shares, sponsor-directors hold 69.49 per cent and the government 27 per cent.

As per the regulatory instruction, Pubali Bank Ltd. will offload shares at the prevailing market price.

It got the shares of the ICB after its nationalisation in 1972 following independence. Later, the bank was denationalised in 1983.

Initially, Pubali Bank had a plan to sell 0.5 million shares per month but the prevalent distressed market situation made it impossible, said Mohammad Ali, managing director of the bank.

"The market does not have enough buyers to absorb such a huge amount of shares. Our bank has preparation to comply with the regulatory provision. We will do it as the market situation gets better," he said.

The main reason why the regulator stresses the need for increasing free float is that stocks with a small free float are more volatile and vulnerable to price manipulation.

The state-run ICB, presently an 'A' category company, was listed on the stock exchange in 1977. Its share price has remained stuck at the floor price of Tk 87.60 since December 4 last year.

Apart from the ICB, Berger and Walton were also asked to increase their free float shares.

The amount of free float shares of Berger is 5 per cent held by institutes, foreigners and general investors. The company is required to expand it by 5 per cent to comply with the regulatory provision.

Managing Director of Berger Ms. Rupali Chowdhury refused to make any comment on the progress made to that end.

Walton has free-floated only 1 per cent of its outstanding shares. It is required to float 9 per cent more shares.

Company secretary Md. Rafiqul Islam said they were already through the process of increasing the free float.

"Sale orders for 0.3 million shares have already been placed on the exchange's block and main board. But the execution of sales of a portion of the shares remains pending due to the floor price."

Mr Islam added that another 5 per cent shares of the company would be gifted to ex-board members.

"These shares will also be treated as free float as they are not in the company's board now. The free float will surpass 10 per cent [of the outstanding shares] soon."

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