BSEC grilled for poor IPO quality 

• 91 companies listed on capital market in last 7-8 years
• Half of their shares' prices have now halved 
• 98% private investment come from banks, only 2% from the capital market 
• Tax gap between listed and non-listed companies should be widened to attract good companies 

Rebuilding confidence of investors in the capital market will not be possible even with increased financial literacy if good governance is not ensured, said Dhaka Stock Exchange (DSE) Chairman Yunusur Rahman at a roundtable on Saturday.

In the last seven-eight years, 91 companies have been listed on the capital market. But most of them failed to live up to expectations of their shareholders, eventually causing them to suffer, the DSE chairman, also former finance secretary, noted at the event titled the "Current scenario and outlook of the capital market of Bangladesh" held in a city hotel.

Capital Market Journalists Forum and Bangladesh Merchant Bankers Association (BMBA) jointly organised this programme.

Farooq Ahmed Siddiqui, former chairman of Bangladesh Securities and Exchange Commission (BSEC), said in the last 10 years, only a few good companies have come to the capital market as most of them are getting long-term loans from banks when they need money. 

Explaining the situation, he pointed out that 98% investment in the private sector is coming from banks, while the capital market's stake in it is only 2%. 

"This is a serious problem with the capital market. It will not improve without good companies," he also said.

In response to criticism about the capital market, BSEC Chairman Professor Shibli Rubaiyat-ul Islam said, "We should also think about with whom we are comparing the market while criticising it."

"Don't India and the USA have junk shares?" he questioned, asking to get informed about how many companies are shutting in the two countries every day.

Speaking on stock market manipulation, the BSEC chairman said it takes six months to a year to identify a share market gambler in the existing system.

"We can take action when the stock exchange promptly gives the investigation report. It usually takes six months to a year to scrutinise the evidence and punish the culprit," he continued.

Shibli Rubayet-Ul Islam said various measures have been taken to establish good governance. Action has also been taken against those involved in manipulation based on investigations. 

They have also taken initiatives to bring good companies into the market, he added.

BSEC former chairman Dr M Khairul Hossain 40% of IPO shares in India are below face value, while it will not be more than 10% in Bangladesh.

He believes. "The number of non-compliance companies in Bangladesh is less than in all the countries of the world."

The BSEC chairman said, "Asking someone to invest in the capital market is not my job. Besides, I am not supposed to hold roadshows abroad, yet I am doing this for the national interest."

"We are getting good feedback about the roadshows. We have organised roadshows in divisional cities within the country, in the future, we will do it at the district level as well."

Capital market analyst Professor Abu Ahmed suggested further increasing the tax gap between listed and non-listed companies to attract good companies to the capital market.

Earlier, the tax gap between listed and non-listed companies was 10%, but in the current budget, it has been reduced to 7.5%.

Talking about it, he said if the tax gap is widened, good multinational companies will come to the capital market.

Differing with him, former BSEC chairman Farooq Ahmed Siddiqui said even if the tax rate difference between listed and non-listed companies is expanded, companies will not come to the market because they get long-term loans from banks very easily.

Presenting a keynote at the programme, Md Moniruzzaman, vice-president of Bangladesh Merchant Bankers Association, said despite many ups and downs, there is a long term growth trajectory. 

He said there are many opportunities to increase the number of investors in the capital market in the future because FDR accounts in the country now stand at 48.7 lakh and there are shares in 14 lakh BO accounts.