17 IPOs, but not enough to cure ailing stocks

Sarwar A Chowdhury

Seventeen new securities — sixteen equity stocks and one mutual fund — raised Tk 1,186 crore from the stockmarket through initial public offerings (IPOs) this year, according to Dhaka Stock Exchange.

However, the new IPOs were not enough to inject vigour into the market, which showed signs of volatility with the key index remaining in the red for the second year since a price debacle in January last year.

Both the number of securities and the raised amount were higher than those in the previous year, as half of the approved IPOs were from the pending IPOs waiting for approval in 2011.

After the price debacle, the regulator virtually stopped giving approvals to new IPOs.

And when the regulatory body was restructured, there was a go-slow policy as well in approving new IPOs.

However, the process got a momentum this year. The value of the public offerings in 2011 was Tk 872 crore.

Although the Bangladesh Securities and Exchange Commission modified the book-building method — a price discovery system — for IPOs, no company used the mechanism.

The firms that previously went for IPOs using the book-building method revised their IPO plans under the fixed-price mechanism.

Merchant bankers said the number of new IPOs could have been higher this year if the market remained stable.

“The market did not see any upward trend this year, and the bearish trend continued for the second year,” said Mohammad A Hafiz, president of Bangladesh Merchant Bankers' Association.

The merchant bankers help bring new securities into the market.

However, Hafiz said the new companies that entered the market in 2012 helped the price index remain at a sustainable level at around 4,000 points.

“Had these IPOs not come, the index would have gone down further and panicked the retail investors,” he said.

However, he said better days are ahead as many companies plan to come to the market to raise working capital.

“The stockmarket is the easier option for raising funds,” he said.

“Many companies are in the pipeline to enter the market, and we expect a good flow of new IPOs in the coming year,” he added.

Source: The Daily Star