Fund raising through rights drops sharply in outgoing FY

Funds raised by listed companies from rights issue fell drastically by 62 per cent in the outgoing Fiscal Year (FY) 2017-18 compared to the previous fiscal.

Three listed firms netted about Tk 3.93 billion, including premium of Tk 622 million, by issuing more than 330 million rights shares in the outgoing fiscal year, according to statistics available from the Dhaka Stock Exchange (DSE).

Market insiders said securities regulator’s go slow policy in giving approvals, insufficient documents and a downward trend in the secondary market were the factors behind the significant fall of rights issue.

The DSEX, the prime price index of the premier bourse, fell 5.42 per cent or 291 points to reach at 5,365 points as on Tuesday, the last trading session before Eid-ul-Fitr vacation.

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 FY 2017-18, one was from the non-bank financial institution sector, one from engineering and the rest one from textile sector.

The companies which raised capital through rights shares in the FY 2017-18 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.

The purpose of the issuance of rights shares is to raise further paid-up capital for expansion of the business, to meet the requirement of working capital and to pay off debts of the company.

LankaBangla Finance raised Tk 1.59 billion by issuing 159 million ordinary shares of Tk 10 each to comply with the condition of BASEL-III.

Alif Manufacturing Company, previously known as CMC Kamal Textile Mills, raised a capital worth Tk 1.09 billion by issuing 109 million rights shares.

In the FY 2016-17, four listed companies—Bangladesh Thai Aluminium, IDLC Finance, Saif Powertec and IFIC Bank – raised a capital worth of about Tk 10.42 billion, including premium of Tk 1.82 billion, the DSE data shows.

-bb/rmc