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BBA Discussion Forum / Regulator relaxes IPO rules
« on: October 22, 2010, 02:11:08 AM »
IPO RULES:
Companies with Tk 18 crore in minimum paid-up capital will be allowed to go public, according to new rules set by the Securities and Exchange Commission (SEC) yesterday.
The minimum size of an initial public offering (IPO) should be Tk 12 crore, meaning a company with at least Tk 30 crore paid-up capital, including the minimum IPO size, can go public.
A company with big capital will have to go for an IPO with minimum shares equivalent to 10 percent of the total of its paid-up capital and IPO size.
For example, if a company's existing paid-up capital is Tk 150 crore and it wants to raise Tk 10 crore from the stockmarket, its IPO size should be at least Tk 16 crore, which is 10 percent of Tk 160 crore.
The stockmarket regulator took the decision of easing the IPO rules at a meeting on Tuesday, according to the minutes of the meeting made public yesterday.
Market experts and merchant bankers welcomed the SEC move on the IPO rules, but said the regulator should have relaxed the rules much earlier.
They said it will encourage more new companies to go public at a time when the demand for fresh issues is increasing day by day.
"Though it's late, it will help bring new issues, as many will be interested now to go public," said Salahuddin Ahmed Khan, former chief executive of Dhaka Stock Exchange.
Arif Khan, president of Bangladesh Merchant Bankers' Association, said: "It's a positive development. Many more companies will be eligible to be listed now."
"Although we earlier requested the SEC to allow a company with at least Tk 25 crore in paid-up capital, including the IPO size, to go for listing, the Tk 30 crore ceiling is okay," said Khan, also deputy managing director of IDLC Finance Limited.
Other merchant bankers, who manage IPO floatation, said with the relaxed IPO rules, they will now be able to attract more companies to the market.
In line with the previous IPO rules that were laid out in March this year on the government's prescription, a company must had a minimum of Tk 40 crore in paid-up capital, including the IPO size, to list on the exchanges.
If the company's existing paid-up capital and IPO offer size was Tk 75 crore, it had to offer new shares equivalent to 40 percent of Tk 75 crore, while the percentage ratio for paid-up capital above Tk 75 crore to Tk 150 crore was 25 percent or Tk 30 crore, whichever higher; and for more than Tk 150 crore it was 15 percent or Tk 40 crore, whichever higher.
Now, as per the relaxed IPO rules, there will be no such slabs.
The IPO rules were relaxed following continuous criticisms from economists, entrepreneurs and merchant bankers during the last seven months.
In August, the consultative committee of the SEC recommended relaxation of the IPO rules to encourage more companies to be listed.
With the previous rules in place, only a few companies entered the market.
Source: The Daily Star (22 October 2010)
Companies with Tk 18 crore in minimum paid-up capital will be allowed to go public, according to new rules set by the Securities and Exchange Commission (SEC) yesterday.
The minimum size of an initial public offering (IPO) should be Tk 12 crore, meaning a company with at least Tk 30 crore paid-up capital, including the minimum IPO size, can go public.
A company with big capital will have to go for an IPO with minimum shares equivalent to 10 percent of the total of its paid-up capital and IPO size.
For example, if a company's existing paid-up capital is Tk 150 crore and it wants to raise Tk 10 crore from the stockmarket, its IPO size should be at least Tk 16 crore, which is 10 percent of Tk 160 crore.
The stockmarket regulator took the decision of easing the IPO rules at a meeting on Tuesday, according to the minutes of the meeting made public yesterday.
Market experts and merchant bankers welcomed the SEC move on the IPO rules, but said the regulator should have relaxed the rules much earlier.
They said it will encourage more new companies to go public at a time when the demand for fresh issues is increasing day by day.
"Though it's late, it will help bring new issues, as many will be interested now to go public," said Salahuddin Ahmed Khan, former chief executive of Dhaka Stock Exchange.
Arif Khan, president of Bangladesh Merchant Bankers' Association, said: "It's a positive development. Many more companies will be eligible to be listed now."
"Although we earlier requested the SEC to allow a company with at least Tk 25 crore in paid-up capital, including the IPO size, to go for listing, the Tk 30 crore ceiling is okay," said Khan, also deputy managing director of IDLC Finance Limited.
Other merchant bankers, who manage IPO floatation, said with the relaxed IPO rules, they will now be able to attract more companies to the market.
In line with the previous IPO rules that were laid out in March this year on the government's prescription, a company must had a minimum of Tk 40 crore in paid-up capital, including the IPO size, to list on the exchanges.
If the company's existing paid-up capital and IPO offer size was Tk 75 crore, it had to offer new shares equivalent to 40 percent of Tk 75 crore, while the percentage ratio for paid-up capital above Tk 75 crore to Tk 150 crore was 25 percent or Tk 30 crore, whichever higher; and for more than Tk 150 crore it was 15 percent or Tk 40 crore, whichever higher.
Now, as per the relaxed IPO rules, there will be no such slabs.
The IPO rules were relaxed following continuous criticisms from economists, entrepreneurs and merchant bankers during the last seven months.
In August, the consultative committee of the SEC recommended relaxation of the IPO rules to encourage more companies to be listed.
With the previous rules in place, only a few companies entered the market.
Source: The Daily Star (22 October 2010)