Stock regulator instructs Berger Paints to revise its right share issuance proposal
In January, the paint manufacturer had announced its plan to issue right shares exclusively to general shareholders and its eligible employees, excluding its sponsor-directors
The Bangladesh Securities and Exchange Commission (BSEC) has instructed Berger Paints Bangladesh to submit a revised application for its proposed right share issuance, aimed at increasing free-float shares to 10% from 5% in the secondary market.
In January, the paint manufacturer had announced its plan to issue right shares exclusively to general shareholders and its eligible employees, excluding its sponsor-directors.
The company, before unveiling its plan to the public, had already received an exemption from the stock market regulator in December 2023, after it applied for it in August 2023.
The exemption was granted because the plan to increase free float shares in the market, as per a previous BSEC order, would not have succeeded if rights shares had been issued to all shareholders.
Keep updated, follow The Business Standard's Google news channel
However, after ten months, the present commission has advised Berger Paints Bangladesh to reapply for the issuance of right shares.
A letter outlining the recommendation has already been sent to the company.
Khandker Abu Jafar Sadique, company secretary of Berger Paints confirmed to The Business Standard that they received the BSEC's letter last week.
He stated that the commission has suggested submitting a revised application, and the company will comply as per the recommendation.
In September 2021, the BSEC had ordered Walton Hi-Tech Industries, the Investment Corporation of Bangladesh (ICB), and Berger Paints Bangladesh to ensure 10% free float shares. However, when these companies went public, there was no requirement to maintain at least a one-tenth stake for public investors.
In December last year, the former Shibli Rubayet Ul Islam-led commission exempted Berger from issuing rights shares to its sponsors, directors, and investors holding 5% or more shares of the company.
Under the rights issue rules, the rights shares of sponsors and directors of a company are usually locked for three years. To facilitate increased public shareholding, the BSEC exempted Berger from this rule.
The paint maker, in a letter, noted that it had previously tried to comply with the 2021 regulatory order by selling 5% of its current shares held by sponsor-directors through block transactions on the Dhaka and Chattogram stock exchanges.
However, the effort was unsuccessful due to insufficient demand at the given market price amid global economic uncertainty and poor market liquidity.
Berger subsequently explored alternative ways to ensure at least 10% of its shares are available for general investors.
Berger, which holds over half of the paint market share in Bangladesh and became a publicly traded company in 2006, consistently reports substantial profits and provides generous dividends to its shareholders.
Between April 2022 and September 2024, its revenue was Tk1,265 crore, and its profit stood at Tk153 crore. Last year, the company paid a 500% cash dividend to its shareholders.
Yesterday, Berger's shares, which have a face value of Tk10, closed at Tk1,766.60 on the Dhaka Stock Exchange, marking a 0.14% decrease from the previous session.
