Some big companies would go public as a few of those were waiting for necessary approval and others taking preparation.
Presently, a good number of companies such as Union Bank, NRB Global, and Omera Petroleum were in the pipeline, Bangladesh Securities and Exchange Commission (BSEC) Chairman Prof Shibli Rubayat Ul Islam told the FE on Sunday.
“We have heard that bkash will also go public,” he said, in response to a question whether the regulator has a plan to bring more large-cap companies like Robi Axiata to the market soon.
“We have also approved another large IPO (initial public offering) proposal of NRBC Bank,” he revealed, adding that all the companies are large-cap ones and have good fundamentals.
He said the commission is continuing its effort to enhance the market depth through listing large-cap companies having good fundamentals.
“Sometimes we are advised not to approve IPO proposals. But the depth of the capital market will not be enhanced if we think about the secondary market only,” Prof. Islam said.
“So, we cannot stop IPO approvals for the sake of the market’s depth as we lag much behind many markets of other countries.”
The capital market experts have also stressed listing more large companies having good fundamentals to deepen the country’s capital market and prevent rumour-based speculations and manipulation.
Bringing such companies would also help attract foreign portfolio investors who show hardly any interest in small-cap companies, they said.
The FE correspondent had talks with the experts and insiders on the possible impact of listing large companies like Robi Axiata in the market.
“More than 0.13 million new BO (beneficiary owners’) accounts were opened just before the Robi’s IPO (initial public offering) subscription,” President of Bangladesh Merchant Bankers Association (BMBA) Md. Sayadur Rahman told the FE.
He added that the large companies help enhance market depth and bring new investors while reducing the scope of speculations and manipulation.
The experts, however, pointed out that the capital market of the country lacks adequate number of companies like Robi, which recently completed its public subscription to raise Tk 5.23 billion, for creating a strong base.
The market has only six such companies having a market capitalisation of billions of dollars. The companies are: Grameenphone, Walton Hi-Tech Industries, British American Tobacco Bangladesh Company (BATBC), Square Pharmaceuticals, United Power Generation and Distribution Company (UPGDC), and Renata.
Apart from Robi, the list of top 10 IPOs included Grameenphone, MJL Bangladesh, The Acme Lab, Orion Pharma, the UPGDC, Bashundhara Paper Mills, Unique Hotel, Shasha Denims, and The Peninsula Chittagong.
These companies floated IPOs worth ranging from Tk 1.65 billion to Tk 4.86 billion during the last 15 years from 2003 to 2018.
Managing Director of IDLC Investments Limited Md Moniruzzaman said the large-cap companies especially the multinational companies (MNCs) have the capability to compete in the local and international market.
“The governance levels of these companies are high. The predictability about these companies is also high due to their openness to the public,” he said.
The market capitalisation of Grameenphone is US$ 5.07 billion, Walton Hi-Tech Industries US$ 2.88 billion, the BATBC US$ 2.25 billion, Square Pharmaceuticals US$ 1.86 billion, and the UPGDC US$ 1.66 billion as of Sunday.
The market capitalisation of Renata was US$ 1.23 billion on Thursday last.
The other listed companies having large market caps are Investment Corporation of Bangladesh (ICB), Marico Bangladesh, Beximco Pharmaceuticals, and Berger Paints Bangladesh.
These 10 companies, out of 355 listed securities, have around 45 per cent stake in the DSE’s total market cap worth around Tk 4.0 trillion on Thursday. This figure shows that a greater number of listed companies own small market caps.
Mr. Moniruzzaman pointed out that the large-cap companies are not family-oriented and they adopt global practices along with maintaining good communication with the investors.
“Manipulators can easily play with the small-cap companies as a large amount of fund is not needed for such act. But it’s not easy to play with the large-cap ones,” he added.
He also said the foreign portfolio investors always take their investment decisions considering a certain amount of market caps of the listed companies. “They never invest in small-cap companies. So, more large IPOs will attract more foreign portfolio investors to our market.”
Asked about the listing of more MNCs, the BSEC chairman said such companies need not to go public for funds as they have already aplenty.
“So, the MNCs can go public to avail the fiscal benefits only. I will tell the Prime Minister that the listing of MNCs will not be possible unless tax benefits are ensured for such companies,” he said, adding that they have a target to get more tax benefits for the listed companies in the next budget.
Presently, there are 12 listed MNCs including the Grameenphone, Bata Shoe, and Marico Bangladesh. After the listing of Robi, the number of listed MNCs will be 13.
The BSEC chairman also said that it was not a wise decision to reduce the tax gap between the listed and non-listed companies. The listed companies pay corporate tax at a rate of 25 per cent and earlier the rate was 35 per cent for the non-listed companies.
But in the budget for the fiscal year 2019-20, the government reduced the corporate tax for non-listed companies to 32.50 per cent. So, the gap came down to 7.50 per cent only from the previous 10 per cent.
The IPO size of the country’s largest telecom operator Grameenphone, which went public in 2009, was Tk 4.86 billion. At the time of floating the IPO, the Grameenphone raised another amount worth above Tk 4.86 through pre-IPO placements.
The Grameenhone’s IPO worth Tk 9.72 billion would have been the largest if the fund raised through pre-IPO placements is taken into account.
On the other hand, Robi’s IPO worth Tk 5.20 billion will be the largest ever if the fund raised by Grameenphone through pre-IPO is not taken into account.
Of other companies that floated IPOs worth ranging from Tk 1.0 billion to Tk 1.58 billion are Western Marine Shipyard, Ring Shine Textiles, Regent Textiles, RAK Ceramics, Esquire Knit, Matin Spinning Mills, Bangladesh Submarine Cable Company, Hamid Fabrics, and Runner Automobiles.