IPOs witness slow pace in 2015

Babul Barman | Published: December 14, 2015 00:00:00 | Updated: February 01, 2018 00:00:00

The initial public offerings (IPOs) witnessed sluggish trend in the outgoing calendar year 2015 compared to a year ago, when a record number of IPOs hit the stock market.
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 operations in primary stock market.
Nine companies, mostly small ones, and three mutual funds raised an aggregate amount of Tk 8.30 billion from the public through initial public offerings, including premium in 2015, according to statistics from Dhaka Stock Exchange (DSE).
In 2014, a total of 20 companies raised fund worth around Tk 13.72 billion from the public through IPOs, including premium, the DSE data showed.
That is slower than the fastest year of 2014 in terms of number of IPOs and raising fund.
Nine companies, those raised funds through IPOs, including premium in 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, Simtex Industries Tk 600 million, Regent Textile Tk 1.25 billion and Information Technology Consultant Tk 120 million.
Among them, seven companies - United Power, BSRM, Tosrifa Industries, Aman Feed, KDS Accessories, Simtex Industries and Regent Textile took premium while two companies - Olympic Industries and IT Consultant raised funds at face value.
Three mutual funds - Asian Tiger Sandhani Life Growth Fund, SMEL Lecture Equity Management Fund and Vanguard AML BD Finance Mutual Fund jointly raised Tk 1.55 billion from the public in 2015.
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.
"Though investors are showing appetite in the primary market, the regulator is approving the IPO slowly considering the market situation," said a leading stockbroker.
"It is a pause in IPO flow due mainly to regulator's slow policy," he said adding "But wheels of IPOs with good quality should always keep on, which helps market remain cool."
"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," said an analyst performing anonymity.
The other purposes of issuing the IPOs included machinery purchase, new project implementation, arranging working capital, buying land and expansion of existing plant and thus making production and attaining profitability.
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.
Since 2005 in Bangladesh stock market, IPO activity began rising to tap the primary markets, taking advantage of growing demand for shares.
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.
Meanwhile, the securities regulator recently made the use of the 'book building' method mandatory for the companies willing to offer their primary shares at a premium.
Only the companies interested to offer their stocks at face value will be allowed to float IPOs under the fixed price method, according to the latest amendments to public issue rules.
Sources said IPO proposals of some 40 companies, particularly from textile, power, pharmaceuticals, real estate, insurance, engineering and cement sectors, are awaiting the securities regulator's nod to raise a substantial aggregate amount of fund.
"The regulator takes a stance to approve IPOs after proper scrutiny taking the present market into account," said a BSEC official.
However, the time of giving regulatory approval depends on the seriousness of the issuer companies, he said.
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