BSEC sets out primary market reforms

The stock market regulator has moved to implement its reform measures on the primary market as part of its two-stage plan to restore investors’ confidence.

On April 29, the Bangladesh Securities and Exchange Commission (BSEC) unveiled the reform measures on both primary and secondary markets, at a meeting with the Dhaka Stock Exchange (DSE), the Chittagong Stock Exchange, the Merchant Bankers’ Association, the DSE Brokers’ Association, and the representatives from asset management companies.

The move is aimed at preventing the plunge in stock prices as well as boosting investor confidence.

The DSE, the premium bourse, has lost more than 700 points in the last three months.

Yesterday, the regulator said it had already implemented all of its planned measures on the secondary market and now plans to carry out reforms on the primary market.

To this effect, the BSEC approved some amendments on public issue rules.

As part of the amendments, eligible investors will have to keep a certain amount of investment in the secondary market in order to enjoy quota advantages in an initial public offering (IPO) lottery.

Similarly, the quota for eligible investors will be reduced to 30 percent from 40 percent. The general investors’ quota (excluding non-resident Bangladeshis) will be enhanced to 50 percent from 40 percent in case of a fixed-price IPO method.

Under the book building method, eligible investors’ quota will be brought down to 50 percent from 60 percent and the general investors’ quota (excluding NRBs) will be increased to 40 percent from 30 percent.

When a company raises fund at face value, it goes through the fixed-price method. On the other hand, the company goes through the book building method if it wants premium over the face value.

In case of a fixed-price method, issuers will have to raise at least Tk 50 crore, 10 percent of the paid-up capital, or which is higher, according to the new amendment.

The issuers will have to raise at least Tk 100 crore, 10 percent of the paid-up capital, or which is higher, if companies go through the book-building method.

During the bidding of the book building method, the bidders’ name and the quoting price will not be displayed. The bidders will get shares at their bidding price and the amount demanded.

The BSEC is also going to amend the public issue rules so that the share of the shareholders, whose names are stated in the prospectus, will be locked for three years and the lock-in period will be considered from the date of the trading commencement instead of the prospectus issue date.

The commission meeting also gave its nod to a proposal of IPDC, which is seeking to raise Tk 141.36 crore by way of a rights issue.

Rights shares are issued to a company’s existing shareholders, who are entitled to buy additional shares directly from the company in proportion to their existing holdings.

The non-bank financial institution will issue 11.78 crore rights shares of Tk 10 each. The premium has been fixed Tk 2.

One rights share will be offered for an existing two shares. IPDC will use the proceeds to strengthen its capital base.

The BSEC also approved the draft prospectus of a Tk 10 crore open-ended fund, namely Constellation Unit Fund. The sponsor, Constellation Asset Management Company, will provide Tk 1 crore.

The BSEC gave the green light to JMI Syringes’ fund raising move through private offer to Japan-based Nipro Corporation, which will buy 1.11 crore general shares worth Tk 10 each.

The shares of Nipro and JMI’s sponsors will be locked for five years.