Companies show lukewarm response to submission of IPO proposals

Companies willing to raise funds showed lukewarm response to submit IPO proposals based on the financials for the year ended on June 30 as COVID-19 hit their businesses along with hampering preparation of going public.

Normally, most of the local companies submit IPO (initial public offering) proposals based on the financial statements prepared for June closing.

But, only one company submitted IPO proposal with the financial statement for ended on June 30 this year, according to information of the Bangladesh Securities and Exchange Commission (BSEC).

The deadline for submitting IPO proposal with the financial statement of June closing has already ended.

Mahbub Mazumdar, managing director at AFC Capital, said the business operations of many companies willing to raise capital were affected seriously following the outbreak of COVID-19.

"A company normally wants to raise funds from the capital market showing good earnings. But the earnings of many companies were affected by COVID-19 and this is one of the reasons responsible for poor response of going public with the financials of June closing," Mr. Mazumdar said.

As per existing rules, a company willing to raise capital from the capital market has to submit IPO proposal within 120 days from the year-end.

The deadline for submitting IPO proposals for June closing ended on October 28.

As a result, the companies willing to raise funds based on the financials of June-end has no scope of submitting IPO proposals.

Mr. Mazumdar said the preparation of submitting IPO proposals was also affected following the closure of offices for months after months.

"Our office was assigned to work for submitting an IPO proposal based on June closing. But we were not able to complete the preparation as the office could not be opened amid lock down," Mr. Mazumdar added.

Mohammad Rezaul Karim, a BSEC spokesperson, said the impact of COVID-19 may be one of the reasons that hampered the flow of IPO submission based on June closing.

Presently, there are seven IPO proposals, submitted under fixed price method, in the hand of the securities regulator.

Of seven proposals, five are old while the remaining two were submitted after taking charge by the incumbent commission.

Of two new proposals, one was submitted by NRB Commercial Bank and another one was submitted by Subra Systems.

And the Subra Systems is the only one company which submitted IPO proposal based on the financials of June closing.

On the other hand, there is no fresh IPO proposal submitted under the book building method.

Asked, an official of listing department of Dhaka Stock Exchange (DSE) said some 25 IPO proposals were submitted in last three years.

"In that's sense, the number of submitting IPO proposals dropped significantly for the year ended on June 30, 2020," the DSE official said.

Earlier, the issue managers made the delay at regulatory end responsible for not going public in right time.

But the incumbent commission has almost cleared the IPO backlogs in a bid to give its consent to raising of funds within shortest possible time frame.

Recently, the BSEC Prof. Shibli Rubayat Ul Islam said it's possible to approve an IPO proposal within one month if the issuer fulfills deficiencies quickly.

The incumbent commission has rejected some 12 IPO proposals while approved 12 proposals.

The BSEC officials said their stance is say 'yes' or 'no' based on the merits of IPO proposals.

Companies willing to raise funds from the capital market can also submit IPO proposals based on quarterly financials.

An issue manager said the IPO flow may rise in December as many of the companies which failed to submit IPO proposals with financials of June closing can take attempt submitting quarterly statements.

The banks, insurers, and financial institutions prepared financial statements for the year ended on December 31.

The companies of other categories, except few ones, prepared financial statements for the year ended on June 30.

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