Regulator takes step to ease IPO rules

Star (October 20, 2010)

The Securities and Exchange Commission (SEC) will seek permission from the government to relax the rules for initial public offerings to encourage more companies to go public.

The chairman of the stockmarket regulator will talk to the finance minister on relaxing the rules, as the existing ones had been laid out on the government's prescription, SEC officials said.

SEC Chairman Ziaul Haque Khondker yesterday sat with the commission's members and executive directors, and asked for their take on the matter. The meeting participants said the move would push non-listed companies to come to market.

In line with the existing rules, a company must have a minimum of Tk 40 crore in paid-up capital, including the IPO offer size, to list on the exchanges.

Following introduction of the new rules last year, only a few companies entered the market. Even though many others were interested, they were deterred by the IPO conditions.

The condition of a required capital base of Tk 40 crore contradicts the book-building method, which allows a company to go for IPO with shares equivalent to 10 percent of the company's paid-up capital, or Tk 30 crore, whichever is higher, analysts say.

In August, SEC's Consultative Committee recommended relaxation of the IPO rules to encourage more companies to be listed.

The committee said a company with at least Tk 25 crore in paid-up capital, including IPO offer size, should be allowed to go for listing.

The Bangladesh Association of Publicly Listed Companies at a meeting of the parliamentary standing committee on the finance ministry last month urged the government and SEC to ease the IPO rules.

In addition, Bangladesh Merchant Bankers' Association, on several occasions, urged SEC to move on the matter.

Merchant bankers, who manage IPO floatation, said if the rules were relaxed, they would be able to attract newcomers into the market.