30 companies raised over Tk. 4000 crore in the past year
By Munir Hossain
Some 30 companies raised funds amounting to Tk. 4031 crore in 2014, out of which 21 companies took Tk. 2708 crore through Initial Public Offerings (IPOs) and 9 companies took Tk. 1323 crore by acquiring rights shares. All of it came from the general (small) investors, who could not reap any benefits out of it.
The investors had expected an active secondary bond market, but that failed in all aspects. Most of the indexes in the market were much below the potential. Even though the demutualisation process at the stock exchange was complete, the Financial Reporting Act has not been enacted yet. Investors have not responded well to the Tk. 900 crore financing scheme.
Experts say the incentives and initiatives that were planned by the regulatory body have not fared well among the investors. But they have forewarned Bangladesh Securities and Exchanges Commission (BSEC) for tackling any future share manipulations.
Supply in Shares
Out of the Tk. 4023 crore taken from IPOs and rights shares, premium was worth Tk. 1944 crore. But in 2013 an aggregate amount of Tk. 4986 crore was raised from the investors. This means a drop in issuance of share in value by Tk. 963 crore.
Rights Share
Nine companies took Tk. 1323 crore through rights shares in 2014. Premium consisted of Tk. 717 crore and the remaining Tk. 606 crore came from the share market. The annual revenue from the share market in 2013 was Tk. 1337 crore, up by Tk. 14 crore.
IPO
Thirty companies raised over Tk. 4031 crore in 2014, out of which 21 companies took Tk. 2708 crore through Initial Public Offerings (IPO). Premium included was Tk. 1227 crore and remaining Tk. 1480 crore from the market. In 2013, eight companies issued rights shares worth Tk. 180 crore, meaning an increase of Tk. 2508 crore in the outgoing year.
Foreign Investment
Foreigners invested Tk. 5,600 crore in the share market in 2014, out of which Tk. 3996 crore was used only for purchasing shares and selling involved Tk. 1604 crore. In 2013 they had invested about Tk. 3361 crore in the market, so, foreign investment here showed a rise.
Capital Market
As of December 24, the market capitalisation in Dhaka Stock Exchange stood at Tk. 3.25 trillion, compared to Tk. 2.64 trillion in 2013. But if 2014’s new addition shares are removed, the market capitalisation would go down further.
Index
The DSE Index stood at 4930 points at the end of the year, but it was 4266 points as of December 30 2013, indicating a rise. But if new companies enlisted in 2014 are removed, the market index would show a decline even more than the 2013 level.
Bank Loan Repayment
The newly enlisted companies repaid most of their bank loans in 2014, but had also placed the rest of the burden on the general investors.
Allegations of Price Manipulation
Even though company shares soared during their initial period, they dipped soon afterwards. A class of investors, as alleged, systematically took money from such IPOs. A newly-enlisted company witnessed their share price rates skyrocketing, but the rate dropped by the second and third day. The prime objective of this class is to pocket the investors’ money.
Financial Reporting Act
Even though it was approved at the cabinet meeting, the financial reporting act has not yet been rubberstamped by parliament. The proposed law is aimed at checking fraudulent practice in preparing balance sheet of companies and ensuring transparency in auditing.
Demutualisation
Demutualisation was an initiative taken to remove ownership from stock exchange management. A 13-member board has already been formed, out of which 7 independent directors have been selected. 40% of those directors are in management level.
Refinancing
Bangladesh Bank had approved of arranging a 3-year-long refinancing scheme for those affected by the share market slumps and crashes. Though Tk. 600 crore has already been raised through two installments, investors’ reaction to this has not been favourable so far.
Experts’ Views
AB Mirza Azizul Islam, former finance adviser to the Caretaker Government, said that most of the indexes in 2014 had been low, and DSE had been static. ‘Due to the lack of investors’ confidence, the market regeneration has not been possible,’ he said. He advised the BSEC to play a more active role in this regard. Investors must be convinced that price manipulation will not ruin their investment prospects. Prof. Abu Ahmed, a market expert, blamed the political environment for this inertia. Dr. Baki Khalily echoed similar sentiments and also expressed concern over a timeframe for recovery in investors’ confidence.
Translated from Bangla by WafiurRahman
