Desh General Insurance Company's public subscription for an initial public offering (IPO) is due to kick off on 14 February and will continue till 18 February.
The company aims to raise Tk16 crore from the stock market to expand its business, issuing shares at Tk10 each through the IPO.
It says it will invest the IPO funds in the capital market, fixed deposit receipts (FDRs) and treasury bonds.
Prime Finance Capital Management is working as the issue manager of Desh General Insurance for the IPO process.
Former industries minister Amir Hossain Amu and Bengal Group of Industries Chairman M Morshed Alam are founders and major shareholders of Desh General Insurance.
According to the company's IPO prospectus, it borrowed Tk8.44 crore from different banks and three companies of Bengal Group for claim settlement till 31 December, 2019. Until that period, it had Tk22 crore in FDRs.
The prospectus said the National Board of Revenue (NBR) claimed Tk6 crore in taxes from the company for fiscal year 2005-2006 to 2015-2016, while the claim settlement remains pending at the tax appellate tribunal.
In 2019, the company suddenly posted 52% growth in revenue, which reached Tk30.81 crore. It had never posted such growth in the preceding years.
The company secretary could not be reached for comment.
According to the audited financial report for the year ending on 31 December, 2019, the earnings per share (EPS) of the company stood at Tk1.36 while net asset value per share was Tk11.62, excluding revaluation.
There are 78 companies – 32 life insurance and 46 non-life insurance – in the insurance sector of Bangladesh. Of them, 23 have not yet been listed on the capital market as per the insurance act.
In 2019, Finance Minister AHM Mustafa Kamal told a press briefing that all insurance companies had to be listed on the stock exchange by the end of that year.
He threatened to cancel the licences of the companies that failed to comply with the directive.
However, according to the amended public issue rules formulated by the Bangladesh Securities and Exchange Commission, a company can apply for an IPO under the fixed price method if it posted net profits after tax in the immediate past year and has no accumulated loss.
Also, a company must apply to accumulate at least Tk30 crore in capital to comply with both requirements.
To help comply with the finance minister's directive, the securities regulator exempted 26 insurance companies from the securities rule to enable them to be listed on the stock market under the fixed price method.
Under the new facility, the insurance companies can apply to the securities regulator for IPOs with the aim of raising less than Tk30 crore. The lowest bar for raising capital through IPOs is now Tk15 crore for insurance companies.
The securities regulator also directed that insurance companies, which have less than Tk30 crore in paid-up capital, invest at least 20% of their equity in the capital market if they want to be listed.
After that, only three companies applied for IPO and got approval from the securities regulator.
Experts have long been saying that Bangladesh is one of the most untapped insurance markets in terms of penetration rate. Awareness and a strong culture of insurance service behind economic activities can help the industry thrive.
Analysis of the compiled data has shown that non-listed insurance companies are still struggling as a few of them are playing their due roles in making the pie bigger by creating new markets.
Non-life insurance companies should thank state-owned insurer and reinsurer Sadharan Bima Corporation, which is sharing with private sector insurers its income from protected businesses to underwrite government properties.
Sultan-Ul Abedin Molla, a former member of the insurance regulator, said there are non-listed insurance companies both from new and old generations, and the old ones are in a more vulnerable position financially.
"They owe a huge penalty to the Insurance Development and Regulatory Authority because they did not get listed on time," he added.