Regulator urges firms for fast utilisation of IPO funds

Now that the pandemic situation has eased, the securities regulator is urging for fast utilisation of the initial public offering (IPO) funds of the newly listed companies that extended their utilisation deadlines because of the pandemic.

The Bangladesh Securities and Exchange Commission (BSEC) is looking into the IPO proceeds utilisation reports of those companies and issued letters to two of them in this regard last week.

A BSEC official seeking anonymity told The Business Standard that most of the newly listed companies could not use their IPO funds properly amid the Covid-19 pandemic as the commission relaxed utilisation of IPO funds.

On the other hand, some companies could not import machinery due to the pandemic. 

But now that the situation is normal and economies have reopened globally, there is no scope to further delay the IPO fund utilisations, he added.

"The BSEC may force these firms to use their IPO funds in stipulated time."

The commission is also trying to find out why entrepreneurs delay using the IPO funds, he further said.

In April last year, the BSEC relaxed all kinds of submission and IPO utilisation due to the pandemic havoc. But some firms are still procrastinating their IPO fund utilisation even after the reopening of the economies.

In August 2018, Aman Cotton Fibrous collected Tk80 crore from the share market to buy new machinery and repay loans. But the company has only repaid its loans so far and is yet to set up new machinery for business expansion.

Alif Manufacturing raised Tk109.4 crore by issuing right shares in 2018, but it is yet to use the fund.

SS Steel Limited was supposed to buy machinery within 18 months after receiving its IPO fund, but is yet to do so.

ADN Telecom, New Line Clothings, Kattali Textile, Silva Pharmaceuticals, and Runner Automobiles are also lagging behind in IPO fund utilisation despite securing approval from their shareholders and the regulators. 

Some companies failed to buy while some failed to install new machinery in their factories because of a lack of expertise. 

Market insiders said many companies enter the capital market showing high hopes but they deviate from their commitments after raising the fund and thus disappoint their investors. 

The firms show their growth appetite and investment urgency before listing. They also exaggerate their products' potential and future demand scenario. It is alleged that many of the firms tactfully overstated their financial statements, market insiders added. 

They said usually, general investors decide to invest in a new firm after analysing its prospectus. But firms forget their commitments after raising the IPO fund. As a result, investors suffer and are deprived of their expected returns.