Three listed companies raised an aggregate amount of Tk 3.66 billion, including premium, in the outgoing calendar year from the capital market through rights issue.
A rights issue is a method of raising capital where a company invites existing shareholders to buy additional shares within a fixed time period in proportion to the shares they already own and usually at a discount to market price.
The companies intended to issue rights shares to strengthen their capital structure and also to use funds for business expansion and loan repayment.
According to statistics available with the Dhaka Stock Exchange (DSE), three listed companies issued collectively about 274 million rights shares and raised Tk 3.66 billion, including premium.
Summit Alliance Port raised above Tk 515 million, including premium through 34.35 million rights shares, GPH Ispat collected about Tk 2.62 billion, including premium by issuing 187.11 million rights shares and Bangladesh Thai Aluminium mobilised Tk 523 million through 52.34 million rights shares.
Among them, two companies - Summit Alliance Port and GPH Ispat- took premium. Summit Alliance took Tk 5.0 as premium and GPH Ispat took Tk 4.0 as premium against Tk 10 face value while Bangladesh Thai Aluminium issued rights at par.
Of the total Tk 3.66 billion raised through rights, the Chittagong-based steel manufacturing GPH Ispat, however, mobilised more than two-third of the total funds raised through rights shares.
Meanwhile, the securities regulator approved IDLC Finance's application to raise Tk 2.51 billion through rights issue on November 21 this year. The non-bank financial institution, which was listed in 1992, will issue 125.7 million rights shares of Tk 10 each that will also have a premium of Tk 10.The rights subscription of company is set to begin on January 1, 2017.
In 2015, Bangladesh Securities and Exchange Commission (BSEC) did not allow any listed company to raise funds through rights offers as it followed a 'go-slow' policy in giving approvals.
Market insiders said low application from listed companies, strict scrutiny and delay in approving the rights offer by the regulator and a bearish trend in the secondary market were the main reasons behind the low number of rights offer.
"Bangladesh Securities and Exchange Commission (BSEC) was very conservative in allowing the listed firms to raise funds through rights offering. Even, the regulator rejected some of the applications of rights offering," said an issue manager, seeing anonymity.
A BSEC official, however, said insufficient documents for regulatory approval and a downward trend in the secondary market were the factors behind the regulator's stance.
The securities regulator however imposed some conditions on rights issue rules in 2013 to make the capital raising mechanism more transparent.
No listed company can offer rights shares within two years of the publication of an IPO prospectus, or before funds raised through an IPO are exhausted or repeat public offering or previous rights, according to the latest modifications.
In 2014, nine listed companies raised about Tk 20 billion through 775 million rights shares, according to data from DSE.
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