Merchant bankers demand a relaxed listing regime

Merchant bankers, in a discussion with the Dhaka Stock Exchange (DSE) on Monday, demanded relaxation of capital market listing rules as too stringent rules are making it hard to attract high-quality companies to the bourses.

Representatives from the country's leading investment banks have expressed the view that the direct listing method should be reinstated for well-performing firms, including numerous multinationals, as these firms do not need fresh capital from the public. This method allows firms to avoid raising capital through an initial public offering (IPO).

After observing some overvalued trading debuts a decade ago, the securities regulator prohibited direct listing of private sector firms.

Also, the process of fixing share price for book building IPOs in the amended public issue rules a few years ago was discouraging companies to go public, investment bankers opined.

Under the book building method, the cut-off price of primary shares is determined by independent bidding from eligible institutional investors (EIIs). However, stringent regulations in recent times have compelled EIIs to submit bids at lower values, leading to a significant decline in the quality of IPOs. Presently, IPO valuations place excessive emphasis on past performance, whereas the investment community focuses on future prospects.

Tech firms often carry accumulated losses for the sake of scale. Such firms, with their intact potentials to grow further and recover losses in future, should be allowed to go public.

Previously, there had been a 10 percentage point gap between the corporate tax for listed and non-listed firms. The government in recent years narrowed it to 7.5 percentage points and merchant bankers believe it emerged as a further disincentive to listing.

Bangladesh Merchant Bankers Association President Md Sayadur Rhaman has called on the government to incentivise listing as publicly traded firms operate in a transparent way and contribute more to the national exchequer.

DSE Chairman Professor Hafiz Md Hasan Babu assured of working on the recommendations and to make the DSE an advocate for increasing the supply of quality securities in the capital market.

Currently, the Bangladesh stock market sees only around five IPOs annually, which is less than half the number in Sri Lanka and only a fifth of the figure in Malaysia. Despite over two lakh registered Bangladeshi companies, fewer than 400 are listed on the bourses.