Valuation gaps, complex rules deter top firms from capital market
Apex MD says many firms joined capital market out of compulsion, not choice
Top entrepreneurs in the country have expressed concerns that due to the absence of proper valuation, complex procedures, and lengthy approval processes, many well-performing companies are reluctant to raise funds from the capital market.
As a result, many firms consider bank loans to be a more dependable and convenient source of finance, they said at a discussion titled "Capital Market Expansion: A Framework for Sustainable Economic Growth", organised by the Bangladesh Merchant Bankers Association (BMBA) today.
Speaking at the event, Syed Nasim Manzur, managing director of Apex Footwear, said Bangladeshi entrepreneurs often rely on short-term bank loans for long-term investments, and many firms entered the capital market out of compulsion, not by choice.
"We don't receive proper valuation or incentives. Earlier, listing in the stock market came with tax benefits, but now those have significantly reduced. As a result, good companies are losing interest in going public," said Manzur, also a former MCCI president.
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He further said listing comes with constant compliance pressure, document requirements, and regulatory hassles, which many entrepreneurs are unwilling to deal with.
"In India, it takes 3 to 6 months to raise funds from the capital market, while in Bangladesh it takes nearly 2 years. That delay forces entrepreneurs like us to rely on bank financing instead," he noted.
Regarding dividends, he commented, "It's not the job of BSEC to dictate how much dividend a company should pay. Business can experience both profits and losses, and investors must be willing to accept that reality."
Uzma Chowdhury, director of PRAN-RFL Group, said she is deeply concerned about the depth of the capital market. "BSEC has taken several good initiatives, but implementation remains weak, which is why the market hasn't reached its full potential."
Speaking about Sukuk, the Shariah-compliant bond, she noted that there is strong interest among the Muslim population, but a proper balance between demand and supply is needed. "We must move forward with a positive mindset," she added.
Uzma added that policies alone are not enough – proper implementation and incentive structures are crucial. "Otherwise, good companies will continue to stay away from the capital market," she warned.
Dhaka Stock Exchange (DSE) Chairman Mominul Islam acknowledged that there has long been criticism about the IPO process. He said the DSE is working to make it faster and more efficient, with a target to complete IPO processes in less than six months. He noted that going forward, BSEC will delegate listing responsibilities to stock exchanges to speed up the process.
He further said no IPOs were issued in the past year, and that bringing IPOs to market is not BSEC's responsibility alone – it also lies with merchant bankers.
"In the last 15 years, 66 merchant banks have brought only 138 companies to the market. This raises questions about their effectiveness," he said. He also mentioned that the quality of some IPOs is questionable and warned that expecting all stocks to rise in value is unrealistic.
"Capital markets are the greatest invention of capitalism," Mominul said. "However, over the past 15 years, we've seen many irregularities that will take time to resolve."
Chief guest Anisuzzaman Chowdhury, special assistant to the chief adviser, said the stock market is now relatively stable but dialogue is essential to make it more stable.
"There have been many mismatches in this market – not just in the stock market, but in the overall economy as well. It will take time to fix these issues, and the solutions must be found through frequent and constructive dialogue," he added.
During the discussion, keynote papers by BMBA President Majeda Khatun and LankaBangla Investment CEO Iftekhar Alam identified challenges in raising capital and recommended reforms.
They noted Bangladeshi firms hesitate to go public due to complex procedures, long processing times, poor valuation, low tax incentives, transparency concerns, and fear of losing control. Limited institutional participation adds to low confidence.
In contrast, markets like India, Malaysia, and Singapore allow more flexible use of IPO proceeds and do not mandate fixed valuation models. No rigid rules on minimum issue size also help firms raise funds as needed, making entry into capital markets easier.
