Funds raised by listed companies through issuance of rights fell sharply by 62 per cent in the outgoing Fiscal Year (FY) 2017-18 compared to the previous FY.
Three listed firms netted about Tk 3.93 billion, including premium of Tk 622 million, by issuing more than 330 million rights in the outgoing FY, according to statistics available from the Dhaka Stock Exchange (DSE).
In the FY 2016-17, four companies—Bangladesh Thai Aluminium, IDLC Finance, Saif Powertec and IFIC Bank—raised a capital worth Tk 10.42 billion, including premium of Tk 1.82 billion, the DSE data shows.
Market insiders said securities regulator's go slow policy in giving approvals, insufficient documents and a downward trend in the secondary market were the major factors behind the significant fall of rights issue.
"The regulator was conservative in allowing listed companies to raise funds through rights shares, as a downward trend prevailed in the secondary market in the outgoing fiscal year" said an analyst at a leading brokerage firm, preferring anonymity.
The DSEX, the prime index of the premier bourse, fell by 3.94 per cent or 223 points to reach at 5,433 points as on Monday.
A rights issue is an issue of additional shares by a listed company to raise capital from existing shareholders.
With a rights issue, existing shareholders get the privilege to buy a specified number of new shares from the firm at a particular price within a specified time.
The companies intended to issue rights shares to either strengthen their capital structure or use funds for business expansion and loan repayment.
Of the three firms that raised funds through rights shares in the outgoing fiscal year, one was from the non-bank financial institution sector, one from engineering and the rest one from textile sector.
The companies were: IFAD Autos, LankaBangla Finance and Alif Manufacturing Company.
IFAD Autos raised a capital worth more than Tk 1.24 billion through issuance of more 62 million rights.
The automobile dealer issued two rights shares against five existing shares at a price of Tk 20 each, including a premium of Tk 10 each.