IPOs see sluggish activity in nine months

Babul Barman | Published: September 28, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

The initial public offerings (IPOs) witnessed sluggish activity in the first nine months of 2015 compared to the same period a year ago, when a record number of IPOs hit the stock market.
A total of Tk 5.38 billion has been raised by seven companies from the public through IPOs, including premium, in the first nine months (Jan-Sept) of 2015, according to statistics from Dhaka Stock Exchange (DSE).
Seven companies those raised funds through IPOs in nine months of 2015 are - United Power Generation & Distribution Company Tk 2.37 billion, Bangladesh Steels Re-rolling Mills Tk 612.50 million, Tosrifa Industries Tk 638.72 million, Olympic Industries Tk 200 million, Aman Feed Tk 720 million, KDS Accessories Tk 240 million and Simtex Industries Tk 600 million from the public.
That is slower than the first three quarters of 2014 in terms of number of IPOs and raising fund, the DSE data showed.
In the first nine months of 2014, fifteen companies, mostly small ones, raised Tk 9.50 billion including premium from the public.
The 15 companies were -Emerald Oil, Matin Spinning, Hwa Well Textiles, FAR Chemicals, The Peninsula Chittagong, Shahjibazar Power, Khulna Printing & Packaging, Tung Hai Knitting & Dyeing, Shurwid Industries, Far East Knitting & Dyeing, Saif Powertec, Ratanpur Steels Re-rolling Mills, Western Marine Shipyard, Khan Brothers PP Woven Bag and Hamid Fabrics.
The year 2014 was a bonanza year after three years of drought since 2010 when the market boomed and then busted. A total of 20 IPOs raised around Tk 13.72 billion from the public, including premium last year.
Market insiders attributed the slowed-down growth of IPOs to the "go-slow- strategy" by the Bangladesh Securities and Exchange Commission (BSEC), creating backlog in the IPOs.
When IPOs increase, it usually means the economy is getting back its strength, but in our country, the perception is not true as most of the companies here raise fund through IPOs to make loan repayments, they said.
"It is a pause in IPO flow due mainly to regulator's slow policy," said Suborna Barua, assistant professor of finance, department of International Business, University of Dhaka.
However, he said, regulatory approval also depends on the seriousness of the issuer companies.
"But wheels of IPOs with good quality should always keep on, which helps market remain cool," said Mr Barua, also adviser to the Research and Innovation Lab, a research unit of Royal Capital.
Though investors are showing appetite in the primary market, the regulator is approving the IPO slowly considering the market situation, said an analyst, at a leading stockbrokerage firm.
The IPO market was sluggish since the beginning of 2010 when the market boomed and then doomed as the regulator has tried to limit new issues. However, in 2014 it got some pace.
Primary market is a market where securities issued by a company for the first time are offered to the public before being listed with the stock exchange.
IPO is used by companies to raise capital, to possibly monetize the investments of early private investors, and to become publicly traded enterprises.
IPO proposals of some 38 companies are awaiting the securities regulator's nod to raise a substantial aggregate amount of fund under the fixed price and book building method, said a BSEC official.
"The regulator takes a stance to approve IPOs after proper scrutiny taking the present market into account," said a BSEC official.
He said a company can get the regulatory approval before another one, which earlier submitted its IPO proposal, by fulfilling the deficiencies before the preceding one.
Among the companies, whose IPO proposals are under the regulatory scrutiny, majority number of companies came from the textile sector.
The other companies came from the sectors of Power, pharmaceuticals, Real Estate, Insurance, Engineering, Cement and Chemical.
Among the proposed IPOs, mostly small cap companies came particularly from textile, power, pharmaceuticals, real estate, insurance, engineering and cement sectors.
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