BSEC plans to allow large firms on small cap board

KEY TAKEAWAYS

• Small-cap board has become invalid
• BSEC rejected 3 IPO applications recently
• No company to be listed on this board within 2 years
• Issue managers are not interested in small-cap for low fees
• Small-cap rules should be simple and short
• Small entrepreneurs are not as much capable to comply with rules

The Bangladesh Securities and Exchange Commission (BSEC) plans on relaxing rules on qualified investors offer (QIO) to enlist firms with more than Tk30-crore paid-up capital on the small capital board of the bourses.

The securities regulator made this decision considering that the small capital platform was formed in 2019 to attract businesses with a small capital base to the stock market. This objective has virtually failed and become invalid, as no company has yet got approval to be listed with the board on either the Dhaka Stock Exchange or the Chittagong Stock Exchange.

With a view to making the small cap board active, the commission now wants to enlist some companies in the board within this financial year.

If companies whose paid-up capital is above Tk30 crore but are not able to go for an IPO to be listed with the small cap board for the QIO, they can get a waiver of rules, says the commission.

This would make it easy for such companies to comply with the rules when they go for an IPO.

As per existing rules, companies with paid-up capital of Tk30 crore or less can apply to get listed with the small capital platform on the bourses.

According to sources, three companies whose applications for IPO were rejected by the securities regulator recently have applied for exemption. After getting an exemption, they will apply for the QIO.

The paid-up capital of Master Feed Agrotec is Tk57.15 crore, Subra Systems Tk50 crore and Oryza Agro Tk59.08 crore.

Mohammad Rezaul Karim, executive director of the BSEC, said no small-cap company got approval to be enlisted with the small cap board in the past two years due to a number of reasons. "But now the commission wants to activate this board. It will amend the rules to allow companies with more than Tk30-crore paid-up capital to come to this board," he added.

Issue managers are not interested in bringing small capital companies to the market as they pay low fees, sources said.

According to them, rules for small capital companies should be short and simple. Small entrepreneurs are not as capable as listed companies to comply with all of these rules.

In November 2018, the BSEC gave final approval to the Bangladesh Securities and Exchange Commission (Qualified Investor Offer by Small Capital Companies) Rules 2018 with some changes and amendments.