Forty-nine listed companies have raised funds through an initial public offering (IPO) in the past five years, of which the highest number of ten IPOs were from the textile sector and the total volume of funds raised by these companies stood at Tk 564 crore.
Overall, the number of textile enterprises listed on the capital market is now greater than that of any other sector. Currently, the textile industry has 58 listed companies, accounting for about 17% of the total number of listed companies in the capital market.
According to the Dhaka Stock Exchange (DSE), entrepreneurs and private sector companies have raised Tk 3,486.48 crore in capital through IPO over the past five years. Of which Tk 1,389 crore went to the manufacturing sector, Tk 1,337 crore to the services sector and Tk 760 crore was raised by companies in the financial sector.
Three banks raised Tk 648 crore of capital during this period.
Basically, banks and insurance companies raised capital by issuing shares on the stock exchange under the direction of the central bank, whether they invested in government securities and bonds or in the capital market. On the other hand, entrepreneurs in the manufacturing and service sectors raised funds to expand their businesses.
Among the companies that have been listed on the capital market in the last five years, seven are in a good position in terms of activity and profit, three are in crisis, which is why their shareholders do not receive regular dividends .
Shepherd Industries, which entered the capital market in 2017 by raising capital of Tk 20 crore, has recorded losses in the last two financial years.
In the same year, Nurani Dyeing and Sweater Ltd raised Tk 43 crore in capital, but the company’s factory is now closed as its owner fled overseas with the money from the IPO.
The factory of Ring Shine Textile – a 100% export-oriented textile company – is also closed. The company was listed on the capital market in 2019 and raised Tk 150 crore by issuing shares.
Relevant people said that large companies in the textile sector do not come to the capital market. Those listed are basically small businesses that want to raise funds from the capital market to grow their business.
Arif Khan, vice chairman of Shanta Asset Management and former commissioner of the Bangladesh Securities and Exchange Commission (BSEC) told The Business Standard: “Garment or textile is the biggest industry in the country, which is also the sector export key. It is natural for entrepreneurs to be interested in which company is the biggest. They come to the capital market to meet their needs for funds. But unfortunately, the big and good textile companies do not come to the capital market yet.
During the period 2017-2021, various industries in the manufacturing sector raised Tk 1,389 crore in the capital market, of which Tk 584 crore went to the textile sub-sector.
Of the 10 companies in this group, Ring Shine Textile and Esquire Knit Composite Ltd raised the largest volume of capital – Tk150 crore each.
The second highest capital of Tk450 crore was raised by nine companies in the engineering sub-sector. Runner Automobiles and Walton Hi-Tech Industries raised Tk100 crore each while Mir Akhter Hossain Ltd raised the highest Tk125 crore.
In the pharmaceutical and chemical subsector, five companies have gone public by raising capital in the past five years.
Two companies in the food and allied and paper manufacturing industries raised capital by releasing shares.
Two companies in the food and related products sub-sector – Taufika Foods and Lovello Ice-cream, and BD Thai Food and Beverage – raised a total capital of Tk 45 crore during the said period, while a company of the paper sub-sector – Bashundhara Paper Mills – increased Tk200 crore.
Majedul Islam, Managing Director and Corporate Secretary at Bashundhara Paper Mills, told TBS, “Capital was raised in the capital market for the expansion of the business and it was invested so that the revenues and the company’s profits increase”.
Arif Khan, former BSEC commissioner, said: “Although there are many good and big companies in the manufacturing sector, they are not interested in going public. We should try to convince them to come on the capital market.”
The government has granted a 10% tax differential in the case of listed and unlisted companies, and yet entrepreneurs find it inconvenient, he said, adding that more facilities should be offered if necessary to interest them. .
Services and miscellaneous
Over the past five years, entrepreneurs in the fuel and power, IT, telecommunications, hospitality and tourism and miscellaneous sectors have raised Tk 1,337 crore in the capital market to develop their activities.
Five companies in the fuel and power sub-sector of the service sector raised the maximum capital of Tk 570 crore. Among which, Baraka Patenga Power raised Tk 225 crore, while Energypac Power Generation and Lub-rref (Bangladesh) Ltd raised Tk 150 crore each.
Robi Axiata, a multinational in the telecommunications sector, raised the second highest capital of Tk523 crore in the services sector.
Four companies in the IT sector raised Tk 148.25 crore.
Sea Pearl Beach Resort and Spa from the travel and tourism sub-sector raised Tk 15 crore.
Index Agro Industries Ltd and SK Trims and Industries raised Tk 50 crore and Tk 30 crore respectively in the miscellaneous category.
Seven insurance companies and three banks raised capital by issuing shares in the capital market during the period 2017-2021.
Insurance companies collected Tk 112.44 crore while banks collected Tk 648 crore.
Union Bank – a fourth generation bank in the country had raised Tk 428 crore by issuing 42.80 crore general equity for SME and project finance, buying government securities and investing in the stock market .
The South Bangla Agricultural and Commerce Bank raised Tk 100 crore by issuing 10 crore shares for the purchase of government securities.
NRB Commercial Bank raised 120 crore of Tk, issued 12 crore of general stock to buy government securities and invest in the secondary market.
Comparison with peer countries
According to the latest data, 1,951 companies were listed on the National Stock Exchange of India in 2021, while the number is 944 on the Bursa Malaysia, 716 on the Singapore Stock Exchange and 725 on the Thailand Stock Exchange. But the number of companies listed on the DSE is only 345.
Data from DSE shows that in India, Malaysia, Singapore and Thailand, the average stock market quotation was 65, 21, 12 and 28, respectively, over the past five years, while it n was just new in Bangladesh.
Merchant banks manage IPOs to bring companies to the capital market.
Asked why many companies in the country are unwilling to enter the capital market despite it being a long-term source of finance, Sayedur Rahman, chairman of the Bangladesh Merchant Bankers Association ( BMBA), told TBS, “Entrepreneurs get it very easy. Many banks resort to big entrepreneur loans and they also find it difficult to raise capital in the capital market through different processes. On the other hand , many entrepreneurs do not feel interested because they fear transparency.
He also stressed the need for incentives, especially exemption from corporate tax, to raise the listing of large companies in the capital market. Above all, companies will have to give more discounts. Current tax breaks are not enough, he added.