Task Force proposes direct listing for big firms, forced for high-debt seekers 

The Stock Market Reform Task Force has recommended that foreign and large domestic companies meeting the revenue threshold of Tk1,000 crore be eligible for direct listing. 

Currently, only state-owned enterprises are allowed direct listing on the country's stock market.  

The recommendations include those large borrowers taking loans of Tk1,000 crore or more from banks will be required to list in the capital market, with Bangladesh Bank issuing instructions to banks. 

The task force has also recommended amending rules for Initial Public Offerings (IPOs) to ensure transparency, which will attract companies with a good track record.  

The task force submitted its recommendations on capital market reforms, including proposed changes to IPOs and related laws, to the Bangladesh Securities and Exchange Commission (BSEC) on Monday. 

In October last year, the commission formed a task force of five professionals to recommend the necessary reforms in the capital market. To date, the task force has submitted three reports.  

The task force has recommended empowering stock exchanges to approve IPOs, specifying that no IPO should be granted without their approval and that the BSEC's power to force listings should be withdrawn.  

According to the task force report, a capital of Tk30 crore at a fixed price or Tk50 crore under the book-building method should be required for listing on the capital market, and no circuit breakers should be imposed during the first three days from debut. 

The task force has proposed an equal quota for both general investors and eligible investors in IPOs.  

Empowerment of the stock exchange  

In the report, the task force has mandated the empowerment of the stock exchange to approve or deny an IPO. 

The Dhaka Stock Exchange will form a five-member independent expert panel, including a sector expert, chartered accountant, CFA charter holder, banker, and university business faculty member, to review IPOs before submitting them to its board. 

The exchange will approve first, followed by approval from the stock market regulator. If the exchange rejects an IPO, the BSEC cannot approve it. 

Appeals for IPO reviews will be handled by the BSEC, but approval must not be granted unless the exchange's independent team is satisfied.  

Reducing IPO timeline  

Currently, it takes 1-2 years for a company to get IPO approval and raise capital, leading many businessmen and entrepreneurs to avoid the capital market due to the lengthy process. 

The task force has recommended reducing the time to raise capital through an IPO to 5.5 months under the fixed price method and 6 to 6.5 months under the book-building method.  

It has been recommended to reintroduce the Dutch auction method for price discovery in both the fixed price and book-building methods for determining share prices. 

This means that any eligible or institutional investors' bid price will be the price at which shares are allotted.  

Additionally, to further control the behaviour of institutional investors, 50% of their allocation will be lock-in free on the day of share trading, and the remaining 50% will be lock-in free after three months. 

The task force has recommended that no circuit breaker be applied for the first three days of share trading. Currently, a 10% circuit breaker is in effect from the first day of trading.