Small-cap companies will be able to raise funds from the capital market soon, a development that is being viewed with trepidation by analysts.
Companies with paid-up capital between Tk 5 crore and Tk 30 crore will be eligible to raise funds on the small capital platform.
The two bourses have already made the technical and logistic preparation to initiate the small capital board and are now awaiting the publication of rules.
The Bangladesh Securities and Exchange Commission approved the rules for small capital companies last November.
Market analysts are sceptical that the new platform would be much of a success as small companies that maintain financial accounts accurately and corporate governance are few and far between.
M Shaifur Rahman Mazumdar, managing director of the Chittagong Stock Exchange, agreed the challenge prevails. “The big challenge lies in getting the targeted companies. We see huge weaknesses in the large companies' accounts, so small companies that have been maintaining their books well are rare.”
The small companies' financial statements have to be up-to-date and audited. Furthermore, the companies should have growth potential, he added.
Khairul Bashar Abu Taher Mohammed, secretary general of the Bangladesh Merchant Bankers Association, echoed the same.
“It is difficult to find such companies,” he said.
Most importantly, a company can be listed even if it has negative earnings.
“As long as it has growth potential it can get listed. So, there is a big fear that the potential would not come through,” said Bashar, also the chief executive officer of MTB Capital, a merchant bank. However, both the stock exchanges are ready to initiate the board, confirmed the managing directors separately.
“The DSE will need about two weeks to initiate the small capital board after the gazette is published,” said KAM Majedur Rahman, its managing director.
Since the platform is ready the merchant banks can get to work to bring in small-cap companies, he said.