Rights’ issuance dip 79pc this year

Babul Barman | Published: December 30, 2013 00:00:00 | Updated: November 30, 2024 06:01:00

Six listed companies raised Tk 1.80 billion from the stock market through issuing rights shares in 2013. The figure is 79 per cent lower compared to previous year.
According to statistics from the Dhaka Stock Exchange (DSE), six companies issued a total of 531.38 million rights shares to raise the amount. Last year nine companies raised Tk 8.65 billion through issuing 498 million rights shares.
In 2011, a total of 21 companies raised Tk 23.41 billion through issuing 1.17 billion rights shares. The DSE data showed that in the last three consecutive years, rights shares issue fell drastically.
Among the six companies in 2013, Phoenix Finance raised Tk 92.04 million through 9.20 million rights shares; Purabi General Insurance raised Tk 183.68 billion issuing 18.37 million rights shares, FAS Finance & Investments raised Tk 542.48 million through 54.25 million rights shares, National Housing Finance & Investments raised Tk 343.20 million issuing 34.32 million rights shares, First Lease Finance & Investments raised Tk 251.56 million issuing 25.16 million rights shares and BD Finance & Investments raised Tk 390.09 million through 39 million rights offer, according to DSE statistics.
A rights issue is an issue of additional shares by a listed company to raise capital from existing shareholders.
The Bangladesh Securities and Exchange Commission (BSEC) revised the rights issue rules in November 2011 to make it more transparent as issuance of rights shares was identified as a way of manipulation and price inflation by a government probe committee on the stock market scam.
"A listed company must have profitability records for three preceding years and a credit rating if it wants to offer rights shares at a premium," said one of the new rules.
Experts and merchant bankers said the number of rights shares issue could have been higher if the market remained stable. New rules for issuing rights also discouraged issuing rights shares many companies.
Akter H Sannamat, managing director of Union Capital said rights shares issue fell drastically this year as many issuer companies did not show interest as they fear that they will not get expected price.
"The soft money market also discouraged issuer companies to issue rights as they could easily get fund from banks instead of issuing rights," said Mr Sannamat, also the newly elected vice president of Bangladesh Merchant Bankers Association (BMBA).
Mohammad A Hafiz, outgoing president of BMBA said rights shares issue fell drastically as the Securities and Exchange Commission was restricted to approve rights shares issue.
A listed company applied for issuing rights shares to further expansion or increase company's growth, but the securities regulator's restricted issuing rights shares which hindered the company's growth, he said.