The stock market regulator has identified deficiencies in compliance with certain listing rules by Robi Axiata Limited and has asked the country's second-largest telecom operator to explain the points with documentation.
The company has applied to the Bangladesh Securities and Exchange Commission (BSEC) to raise Tk523 crore from the capital market through issuing new shares in an initial public offering (IPO).
BSEC observed that the operator's public offering size is Tk387.74 crore – which is less than 10 percent of its paid-up capital of Tk4,714.14 crore. Here, the company has not complied with public issue rules.
According to public issue rules, an issuer company offers at least a quantity of securities equivalent to 10 percent of its paid-up capital.
Mentioning that Robi's earnings per share, at base value, is negative Tk1.47 – considering five years' weighted average EPS from 2015 to 2019, the regulator has asked the company to explain how it expects to issue its shares to the public at a price of Tk10 per share.
The company received Tk136.07 crore from its employees in share money deposits against which no share has been issued yet. The regulator is no longer giving consent for the private placement.
However, as per the Financial Reporting Council (FRC) notification, the company must allot shares against this share money deposit before June 30, 2020 and calculate EPS considering these new shares.
The regulator thinks that there is no scope to consider this portion – private placement – as a part of a public offering. So, the company will allot shares to its employees first and then submit the revised draft prospectus showing EPS considering these new shares.
BSEC sources said the employees' shares of Robi will be included as private placement or capital raising, which is not covered by the commission.
Private placement is a sale of stocks, bonds, or securities directly to a private investor, rather than as part of a public offering.
So the pre-IPO placement share documents must be submitted properly before getting approval for an initial public offering.
Robi sold shares to its employees on the condition that if the company gets approval from BSEC, they will get the allotment then. Otherwise, the company will return the money to the employees.
The earnings per share of the company was Tk0.04 for the year that ended on December 31, 2020. The regulator believes that the company's earning generation capacity is very poor and it may not be able to pay dividends in the near future to its prospective investors.
The mobile phone operator has shown Thayaparan, S Sangarapillai and Klaus Micheal Kuehner as independent directors of the company.
They are not Bangladeshi residents but according to corporate guidelines, an independent director must be a Bangladeshi national.
The Bangladesh Telecommunication Regulatory Commission has been claiming a total of Tk3,657.08 crore from the company, as of December 31, 2019, for its VAT, tax and system audit.
The company has declared it as contingent liabilities but no provisions have been made for this outstanding claim of Tk3,657.08 crore.
The operator has to explain to the commission and also mention how it will pay this huge amount of claims if the verdict goes against it.
"We are currently awaiting BSEC's approval of our application. As a result, we are not in a position to comment on the issue," Shahed Alam, chief corporate and regulatory officer of Robi Axiata Ltd, told The Business Standard.
"As of now, we are happy with the development in this regard," he added.
The operator will issue 523.8 million new shares at a face value of Tk10 each.
Of the new scrips, 387.7 million shares will be offered to the public, which will represent 7.4 percent of the company's post-IPO number of shares.
On the other hand, its employees and directors will be offered to buy 136.1 million shares under an ESPP, which will represent 2.6 percent of the post-IPO number of shares.
The IPO proceeds will be utilised to fund Robi's capital expenditures and enhance its profile as a leading telecom operator.
The company commenced operations in 1997 as Telekom Malaysia International (Bangladesh), under the brand name Aktel. In 2010, it was rebranded as Robi and the company changed its name to Robi Axiata Limited.
After the merger with Airtel Bangladesh in 2016, it has emerged as the second-largest telecom operator and retained the same name.
This merger helped the operator see profits last year, after several years of losses.
Malaysian telecom giant Axiata Group Berhad holds 68.69 percent of Robi Axiata's controlling shares. Other shareholders in the entity are Delhi-based Bharti Airtel and Tokyo-based NTT DOCOMO.
At the moment, Robi's main competitor Grameenphone is the only telecom operator listed on the Bangladeshi stock market.