Pathogen crushes Delta Hospital’s listing dreams

Delta Hospital, which got the green signal in February to raise Tk 50 crore, has requested the Bangladesh Securities and Exchange Commission (BSEC) to cancel its initial public offering as it got low premium through bidding.

Premium is an additional amount of money over the face value of a share that investors pay when they buy it through IPO.

Institutional investors set the cut-off price of its shares at Tk 11 each through bidding whereas the face value of the company's shares is Tk 10 each. So, the premium would be Tk 1 per share.

If a company fails to secure high premium then it will have to offload a higher number of shares, said an official of the issuer company.

The sponsors will have to buy shares to comply with the regulator's rules of having individually 2 per cent and jointly 30 per cent share of their company.

Due to the low cut-off price, post-IPO shareholdings of the company's seven out of 10 directors would fall short of the 2 per cent mandatory minimum shareholding requirement.

The sponsor-directors' joint shareholding would also fall below 30 per cent.

"The premium is significantly low compared to our net asset value. Our paid-up capital will go up while raising the fund, which will affect our dividend-paying capability in future," said a director of the hospital asking not to be named.

The company's net asset value is Tk 45.84 as on June 2019.

"Our bidding time coincided with the COVID-19 crisis period. As a result, we got lower prices in the bidding," the director added.

The electronic bidding under the book building method of the IPO took place from March 22 to March 25.

The highest bidding price was Tk 46 a share and the lowest Tk 11.

"Institutional investors were a bit shaky due to the ongoing pandemic. So they were hesitant about bidding high," said the research head of an asset management company.

Well-performing companies will not come to the market if they don't get good premium, he said. The regulator on Wednesday directed both the stock exchanges to hold onto the money of the bidding until further notice after Delta Hospital had sent a letter for cancelling its IPO.