Initial Public-Offering (IPO) stands for the process of a private company going public by making their stocks available for the general public to buy. Once the company undergoes IPO, their stocks are sold in the market. Moreover, the existing shareholders can also trade them to the public.
Primarily, for a private company to go public, the IPO can be quite a time-consuming process and can take almost a year to complete. However, the Bangladesh Securities and Exchange Commission has designed a plan to simplify the IPO process in terms of its time obligations to benefit not only the public but also investors.
IPO guidelines in Bangladesh
We often notice private companies that are willing to go public often publish press releases about their IPO initiatives. One example is eGeneration IPO, published in a renowned daily The Financial Express. eGeneration Ltd. is arguably the first IT company in Bangladesh going for IPO (initial public offering)
If a company has to offer IPO and raise their capitals on the Dhaka Stock Exchange Listing, then they must follow specific guidelines listed by the DSE in the year 2015.
- Appoint an issue manager: A company must get the DSE’s permission to raise capital through IPO. As a result, it has to appoint an Issue Manager to get listed.
- Submit draft prospectus: After hiring an Issue manager, the manager has to prepare the draft prospectus. Consequently, he/she has to submit it along with other documents to the SEC and DSE for their approval.
- Draft an Agreement: The Issue Manager, along with the investment bank hired by the company, should make an agreement letter stating their purpose for IPO.
- DSE analysis of the draft prospectus: After the Dhaka Stock Exchange receives the draft prospectus, they examine the performance ratio and financial aspects of the company offering IPO. This is crucial to figure out the long term and small-term consequences of the company’s stocks on the market.
- SEC analysis of the draft prospectus: The DSE sends its verdicts to the SEC within 15 days of the arrival of the draft prospectus after reviewing it. The SEC then analyses other aspects of the company and also takes into account the DSE’s views. Accordingly, after a thorough study, the SEC gives its approval for issuing IPO according to the Public Issue Rule.
- Filing application to the DSE: Once the company is approved for IPO, the Issue Manager must apply to the DSE for listing its securities. This process should complete within five days of approval.
- Opening subscription: After applying, the company must open its subscription for the general public. Then, they have to distribute their shares or refund securities within 42 days after closing the subscription.
- The decision by the DSE regarding the application for listing: The board members of the DSE meet to decide the status of the application for listing. The DSE Board receives the application only once the company has allocated 100% of its stocks.
The Board of Dhaka Stock Exchange must take the appropriate decision within 75 days of the subscription’s closing.
- IPO data transmission: The IPO data of the company is then successfully transferred through IPO data transmission software.
Learn more about IPO process for IT companies.
General requirements for IPO in Bangladesh
There are some standard terms that a company must follow to get listed via IPO in Bangladesh.
- The company must offer up to 10% of its paid-up assets or Tk. 15 cores at face value.
- It has made no substantial changes after including its financial statements in the draft prospectus.
- Its financial statements are audited by the panel auditors. This is as per the Bangladesh Auditing Standards and Companies Act of 1994.
- The financial statements have been prepared under the SEC Rules of 1987 and follow the terms of IFRS / IAS in Bangladesh.
- It has taken part in Bangladesh’s annual general meeting and has worked under the guidelines issued by the DSE board. Especially in the preparation of the draft prospectus.
- The company has not acquired any losses at the time of the application.
- It has complied with the asset valuation guidelines by the Commission.
To Sum Up
Through these reforms in the IPO process, the Bangladesh government has managed to win over investors from almost all industries. It has introduced direct listing and fixed price methods to offer IPO. As a result, it has improved both the primary as well as the secondary market significantly.
Therefore, the IPO process in Bangladesh has given private companies enough visibility and opportunity to attract experts into their business. Furthermore, by applying for listing through DSE, one can track the market value of their company and strengthen its performance.