Entrepreneurs call for flexibility in using IPO funds for loan repayment

Entrepreneurs have urged the securities regulator to allow greater flexibility in using funds raised through initial public offerings (IPOs) to repay loans, including rescheduled loans that are currently regular.

At a meeting with the Bangladesh Securities and Exchange Commission (BSEC) yesterday (23 APril), stakeholders called for revisiting existing restrictions. The discussion, titled "Discussion meeting on IPO proceeds utilisation for loan repayment or investments of issuers," was held at the BSEC headquarters in Agargaon and attended by entrepreneurs and capital market participants.

Under the Public Offer of Equity Securities Rules, 2025, issuers can use up to 30% of IPO and rights public offer (RPO) proceeds to repay outstanding loans or make investments. 

However, this is permitted only if the loans were used for projects or BMRE (Balancing, Modernisation, Rehabilitation and Expansion) purposes and are neither classified nor rescheduled due to non-performance.

Syed Nasim Manzur, managing director of Apex Footwear and a member of the Prime Minister-led Private Sector Advisory Council, said such restrictions are uncommon in many countries, including Bangladesh's regional peers. He suggested expanding the scope for loan repayment from IPO proceeds in line with global practices.

Tapan Chowdhury, chairman of Central Depository Bangladesh Limited and managing director of Square Group, stressed that IPO funds must be used for their intended purposes and deliver tangible benefits to companies or projects. He cautioned against allowing loan repayment solely based on a company's reputation, even for large business groups.

Abdul Hai Sarker, chairman of the Bangladesh Association of Banks and Dhaka Bank PLC, underscored the importance of a strong capital market to enhance global competitiveness and support economic growth, calling for its continued development and expansion.

Mashrur Arefin, chairman of the Association of Bankers Bangladesh and managing director of The City Bank PLC, advocated for allowing companies to restructure capital by repaying loans – particularly those taken for productive or expansion purposes – through IPO proceeds.

Riyad Mahmud, president of the Bangladesh Association of Publicly Listed Companies, noted that even fundamentally sound firms may face temporary losses due to global shocks, leading to loan rescheduling. In such cases, he said, companies should be allowed to use IPO funds to repay those obligations.

Mominul Islam, chairman of the Dhaka Stock Exchange, said companies should be permitted to repay loans with IPO proceeds if it is demonstrably beneficial, but emphasised the need for rigorous scrutiny beyond mere disclosure and compliance.

BSEC chairman Khondoker Rashed Maqsood said the commission is working to ensure the long-term, sustainable development of a vibrant capital market and to encourage new listings. He welcomed stakeholder feedback and said the regulator would review the proposals.

He also highlighted the need for stronger coordination among institutions within the capital market.