Entrepreneurs explain why top companies are shying away from stock market

The Bangladesh Securities and Exchange Commission (BSEC) faces increasing pressure to simplify the process for major companies to go public, as the current corporate listing method is viewed as a missed opportunity for the growth of the country's financial markets.

During a meeting with the securities regulator on Monday, conglomerates highlighted the complex regulatory hurdles associated with initial public offering (IPO) listings and cited the existing valuation methods and inconsistent policies as major barriers.

They called for reforms to better align the stock market with the needs of rapidly expanding businesses.

Prominent figures such as Meghna Group Chairman Mostafa Kamal, City Group Managing Director Md Hasan, and PHP Group Director Mohammad Akhtar Parvez were present in the meeting, chaired by BSEC Chairman Khondoker Rashed Maqsood at the BSEC office in the capital.

TBS spoke with Mostafa Kamal and Reza Uddin Ahmed, Executive Director (Finance and Investment) of City Group, about the discussions that took place during the meeting.

Kamal said he voiced concerns about the lengthy and cumbersome process of listing on the country's stock exchanges.

He criticised the existing framework as too slow for growing businesses, stating, "Raising capital from the market takes two to three years. We cannot afford to wait that long." 

He described this situation as a bottleneck that discourages companies from pursuing initial public offerings (IPOs).

Kamal also suggested that Greenfield start-ups should be allowed to raise funds from the capital market.

Reza Uddin Ahmed, executive director (Finance and Investment) of City Group, reiterated the focus on improving the IPO process which includes revising valuation methods, simplifying listing procedures, and ensuring consistent policies to facilitate established companies' entry into the capital market. 

He said during the meeting, the BSEC chairman assured them that these concerns would be addressed to encourage established companies to pursue funding from the capital market instead of relying solely on bank financing. 

However, Ahmed pointed out that established firms require time to fulfil specific requirements, such as appointing independent directors and undergoing audits by BSEC-approved auditors. 

He added that fostering the right environment could motivate financially strong companies to enter the capital market.

During the meeting, BSEC Chairman Khondaker Rashed Maksud encouraged entrepreneurs from Meghna, City, and PHP Groups to list their fundamentally strong companies on the stock market, assuring them of necessary policy support for this process, according to a press release. 

He said that if these companies enter the stock market, it will accelerate the country's economic growth and industrialisation while also strengthening the stock market itself.

Market insiders said that over the past two decades, several of Bangladesh's largest business groups — including MGI, AKS, City Group, Akij, Pran-RFL, TK Group, and PHP — have expanded significantly without utilising capital markets for financing, relying instead on bank loans. 

This raises questions about the effectiveness of Bangladesh's stock markets in attracting top-tier businesses.

Apart from Robi, no multinational company has been listed on the stock market for many years, leading to a scarcity of fundamentally sound companies despite the stock market's expansion. This gap has allowed some foreign investors to shift their investments from Bangladesh to other countries.

Furthermore, during the tenures of the last two BSEC commissions, the listing of several weak companies on the stock market has undermined investor confidence. In this context, listing fundamentally sound companies could help rebuild that confidence among investors.

The meeting also discussed these three groups' contributions to the country's economic development and the potential for listing their established companies from various industrial sectors on the stock market.