IPO funds fell 31pc last fiscal year

Nine companies and two mutual funds entered the stockmarket last fiscal year, bringing in about Tk 858 crore through initial public offerings (IPOs). The amount was 31 percent lower than that in the previous year.

The number of IPOs was also lower in 2015-16 due to a bearish trend in the market and modification in public issue rules by the regulator.

Fifteen equity companies and one mutual fund raised around Tk 1,246 crore through IPOs in fiscal 2014-15, according to Dhaka Stock Exchange.

The companies raised the funds either for business expansion or for repaying bank loans or both, according to the IPO prospectuses.

However, as a number of companies were seeking premiums in addition to the face value of shares, Bangladesh Securities and Exchange Commission in December last year revised the public issue rules making the use of book-building mechanism mandatory for premium seekers.

As per the revised rules, companies that will offer primary shares with premium prices will have to follow the book-building method to raise capital from public.

The BSEC made the modification to ensure accountability of issuer companies, issue managers, auditors and other stakeholders.

The book building is a process through which an issuer attempts to determine the price of its security based on demand from institutional investors.

The modification compelled many issuer companies to revise their IPO proposals, and it was a major reason behind the decline in number of IPOs.

Apart from revising the public issue rules, the regulator was following a 'go-slow' policy in allowing the IPOs, considering the secondary market that was in a bearish mood, said Akter H Sannamat, a market analyst.  “The market was depressed last fiscal year and it did not perform up to expectations,” said Sannamat, who is also a former managing director of Union Capital and Prime Finance and Investment.

Too many IPOs might have deepened the depression, which is why the regulator stepped in to control the number of IPOs, he said.

DSEX, the key index of the premier bourse, declined only 76 points or 1.61 percent to 4,507 points at the end of last fiscal year. The index even came down to below the 4,200-point level during the fiscal year.