Six months in, new govt yet to break IPO drought

Infographics: TBS

The initial public offering (IPO) drought is showing no sign of easing. More than two years after the last approval, the Bangladesh Securities and Exchange Commission (BSEC) has yet to greenlight a new share offering, despite various initiatives to revive the capital market.

The commission last approved an IPO in March 2024 for Techno Drugs.

Even now, six months after the new government took office and three months into the new BSEC commission's tenure, no company has formally applied to raise funds through an IPO.

This renders the prospect of a new company listing on the stock exchange in the near future increasingly unlikely.

Market stakeholders had anticipated fresh IPO filings with the start of the new fiscal year, as companies seeking capital must submit audited financial statements covering the preceding 180 days.

The prolonged drought has effectively blocked a key avenue for businesses to raise long-term expansion capital, forcing growing reliance on bank loans and internal revenues.

More importantly, there are currently no IPO applications or proposals awaiting approval at the BSEC, according to officials familiar with the matter.

This signals that the issue extends beyond regulatory delays. The deeper concern is that potential issuers are failing to progress from initial interest to formal applications.

Interest exists, but applications do not

Market stakeholders note that while several well-established, financially sound companies wish to raise long-term capital through the stock market, this interest has yet to yield formal applications.

Speaking on condition of anonymity, several merchant bankers told The Business Standard they are preparing several candidate firms for IPOs; however, many are waiting for regulatory clarity before submitting paperwork. 

Prominent groups including BRB, DBL, City, and Confidence have surfaced in market discussions as prospective issuers.

This has created a paradoxical impasse: corporate interest exists and merchant bankers are preparing deals, yet no formal filings are reaching the regulator.

New government, new commission, new rules

The new government took office on 17 February, while the new BSEC commission assumed charge on 4 June.

Since assuming charge, the current commission has placed a strong emphasis on attracting large, high-quality issuers to the capital market. BSEC Chairman Masud Khan noted recently that Bangladesh boasts numerous well-established domestic and multinational corporations whose listings could significantly strengthen the market.

He further said the regulator aims to bring several prominent flagship companies to the exchange over the next six to twelve months, hinting that legal mandates could be considered if voluntary listings stall.

However, BSEC spokesperson Abul Kalam told TBS that the commission has not asked any company to refrain from applying for an IPO because of its initiatives to reform the regulatory framework.

"No IPO application will proceed unless an issue manager or company formally submits one," Kalam noted, adding that direct listing rules are now active alongside ongoing efforts to simplify the overall IPO framework.

Nearly Tk1,000 crore worth of proposals withdrawn

According to market sources, around 18 public offering proposals, including IPO applications, have been cancelled or withdrawn at various stages since March 2024.

These proposals could have raised around Tk1,000 crore from the capital market.

The contraction in the primary market is also evident from annual fundraising figures. In 2024, four companies raised Tk645 crore through IPOs. In 2023, four companies raised around Tk202 crore.

Earlier, six companies raised Tk626.26 crore in 2022, while 15 companies raised Tk1,858.44 crore in 2021.

Why are companies staying away?

Market stakeholders point to several factors driving the prolonged IPO drought. Valuation remains a primary concern, as entrepreneurs fear diluting ownership at unfavourable prices.

Regulatory uncertainty further fuels caution, with frequent changes to the IPO framework leaving prospective issuers hesitant to submit filings.

Additionally, companies are wary of post-listing compliance burdens, including stringent requirements for financial reporting, auditing, corporate governance, and independent director appointments. 

Business owners are also seeking greater flexibility in how IPO proceeds are utilised – specifically for expanding operations and retiring expensive bank debt.

The problem is now the pipeline

The IPO problem has shifted from approval to pipeline. There are currently no IPO applications awaiting approval at the BSEC.

Although Bangladesh has 66 licensed merchant bankers engaging with prospective issuers, many firms are holding off until a more stable and predictable regulatory landscape takes shape.

To address this, the capital market reform task force has recommended streamlining the IPO process, lowering regulatory fees, reducing compliance hurdles, and implementing digital filing systems.

The key challenge for the government and BSEC is therefore to create a stable framework that encourages quality companies to move from initial interest to formal IPO applications and rebuild the market's pipeline of new issuers.