Initial Public Offering (IPO) Process in Bangladesh

At some points of its business operation every company needs to raise money. To do this, companies can either borrow the same from somebody or raise the amount by selling ownership of the company. The later is known as issuance of stock. When a company go for public issue for the first time it is known as Initial Public Offering (IPO). IPO's are the first sale of stock by a private company to the public. An initial public offering (IPO)or stock market launch is the first sale of stock by a company to the public.

IPO denotes the means of collecting funds from the public through public offering procedure. Public Offering (PO) means collecting funds for capital from the public. IPO can be made through fixed price method, Book Building method and direct listing. These listing methodologies have been set by "Securities and Exchange Commission (Public Issue) Rules, 2006".

This report is about the Process of IPO (Initial Public Offering) in Bangladesh. The concept of IPO process is very common in our country. In this report I have tried to shown the overall IPO procedure of our country, advantages, problems of IPO etc.

Source: Investopedia

Overview of Capital Market in Bangladesh

Capital market ensures efficient transfer of resources from savers to borrowers. The journey of our capital market begins in 1954. In the second chapter an overview on the prime bourse of the country- DSE is provided. The first chapter describes an overview of capital market of Bangladesh. Trading begun in 1956.

Chief Executive Officer (CEO) is the head of the management. Second building at Nikunja within a short time. Divisions include Monitoring, Investigation, and Compliance & Legal Departments etc.

Types of IPO

Under fixed price method, the company cannot fix up its price for IPO. BSEC fixes up the price. TK 10. Book-building system for initial public offer. Which want competitive price of their initial offers. For the introduction of the book-building system. Competitive pricing of company’s IPOs. Preparing the draft policy guideline. Companies to raise capital from the capital market.

Business enterprise in the stock markets through competitive bidding. Choose some seller groups or brokers to put up those shares for sale to retail investors. Turn play a role in ensuring that the company operates in an efficient manner.

Advantages of IPO

A strong capital market acts as a vehicle for growth of the economy. Well fundamentals ensures this growth for the economy. Ensure the listing of good companies. Procedure of draft prospectus have got some sort of problems. Fund raising etc. Weaknesses. Basically, the analysis is a prospectus based analysis. Analysis purpose. Process recently.

Our economy is starving for a matured and stable capital market. Regulators. Won the confidence of investors from all walks of life. Our emerging economy mostly invited the funds from all over the globe. Shown amazing growth. Market but also of our room for new products. Price method, our primary market is improving in line with the secondary market. International level. Access to capital. Listing provides. Offering. Some care has to be taken not to appear greedy. Popularity. The IPO has got some disadvantages also. There are costs associated with gaining quotation. Be taken up fulfilling the obligation that goes with IPO, too. Opportunity for greater firepower in the market. Qualified staff.

Public issues do not provide any fixed rate of interest, unlike debentures. In comparison to debentures, the ownership of a shareholder is easily transferable in the case of public issues. As compared to any other form of securities, shares are more liquid as they can be converted into cash easily. The goodwill of a company increases when it trades shares on a recognised stock exchange. It also increases the level of transparency and trust among the investors and the public.

The IPO Process

The IPO approval process starts with the submission of application to Bangladesh Securities and Exchange (BSEC). For helping the company issuing the common stock (known as issuing firm), the issuing firm appoints an issue manager from the list approved by BSEC. There are two methods in IPO process. One is fixed price method and the other is book building method.

In fixed pricing method, the shares are offered at par value. If the issuing firm wants to issue shares at a premium, it has to follow the book building process. In book building method, the price of the share are determined following a road show. In the road show, the prospectus of the issue is sent to all eligible investors for submission of price of the impending issue. From the prices submitted by eligible investors, the IPO priced is fixed.

After getting the approval of the BSEC, the issuing firm has to invite subscription from the public. This is done through publication of prospectus in at least two national newspapers. Interested investors are asked to submit their subscription through their brokerage houses within the subscription period.

The issue is oversubscribed, lottery is conducted to determine who, among the subscribers, will get the shares and who would not. If the issue is undersubscribed, the underwriters would take up the unsubscribed portion of the issue. The IPO ends after the allocation of the shares to the winning subscribers. Then the listed process starts.

The shares that are brought through IPO process, must be listed in at least one of the two stock exchanges - the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE). The listing is listed for the IPO shares to be traded in the stock exchange. There are certain processes to be followed to list the security. Both the IPO and listing processes are discussed in detail in this report.

In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market. Communication with the BSEC on all issues after IPO application. Complex process of going public and raising capital through an IPO or RPO.

An unlisted company is a public corporation whose shares are not listed on a stock market or traded on any recognized stock exchange. It can also enter the primary market through an initial public offering. An initial public offering (IPO) is the first time an unlisted company offers its shares to the public. As a result, the IPO process serves as a watershed moment for any unlisted firm, allowing them to raise cash through public subscriptions. However, this method is significantly riskier than a Further Public Offering because a company joins the market for the first time by releasing a prospectus.

Further Public Offering occurs when a publicly traded firm makes a sale offer or issues new shares to the public in order to raise funds. FPO refers to a firm that has previously been listed and has completed the IPO procedure and plans to issue shares to the general public. It is done to encourage future public investment. FPO is less riskier than an Initial Public Offering because investors are already aware of the company’s success and have a good understanding of its growth prospects.

In collaboration with the BOD, shareholders may offer a portion of their holdings to the general public. The prospectus of a firm is referred to as its LOI. Furthermore, the Company’s shareholders refund any expenses incurred in connection with the offer. Consequently, any dividend paid or declared on these shares is paid to the transferee.

Key Intermediaries in IPO

In Bangladesh, the many types of intermediates necessary with a valid proof can be classed into:

Merchant Banker: Merchant Bankers are the most important intermediates of all. They support a firm throughout the process, from creating a prospectus to listing its securities on a recognised stock exchange. Merchant bankers check and verify all of the information presented in the prospectus by conducting due diligence on all of the data. Following that, they issue a certificate to the Bangladesh Bank.
Underwriters: Underwriters must subscribe to a company’s unsubscribed shares. Underwriters come into play when shares are undersubscribed.
Registrar and Share Transfer Agent: The Registrar and the Share Transfer Agent determine the basis for allotment of shares received from the public. They are also in charge of sending out share certificates and refunds.
Issue Bankers: The Issue Banker receives all applications on behalf of the Issuer Company. These applications are subsequently submitted to the Registrar and Share Transfer Agent for further processing.
Stock Brokers and Sub-Brokers: The Issuer Company pays Stock Brokers and Sub Brokers a commission for urging the public to subscribe to its shares.

Issue management efforts are a crucial component of a merchant banking operations. As issue manager, a merchant Bank oversees the Initial Public Offering (IPO), right offers, and repeat issues of shares and debentures. It also allows an issuer to place shares with public/institutional investors prior to the IPO. Issue management activities include preparing prospectuses (for IPOs and repeat offerings) and right offer documents (for right offers), submitting them to the Bangladesh Securities and Exchange Commission, and receiving their approval. RIL also provides logistical and other help in the collection of money applications, the review of application forms, the formation of a lottery in the event of oversubscription, and the distribution of allocation letters and reimbursement warrants, where applicable.

Issue management refers to the administration of business securities that are regularly sold to the public and existing shareholders on a rights basis. Merchant bankers and top managers must manage issues effectively. In Bangladesh, merchant bankers with the necessary professional skills and expertise manage capital concerns. One of their responsibilities is to manage issues. Factors such as the massive growth in the number and scale of publicly traded firms, as well as the complexity that arises as a result of the ever-increasing BSEC standards, have all contributed to merchant bankers’ increasingly crucial position in recent years.

In Bangladesh, public issues are one of the most common methods of generating capital from a large number of investors. During this process, a firm distributes a prospectus to the general public, inviting them to purchase its shares by paying the share application money. It is a method of issuing convertible shares or securities in the primary market to entice new investors to subscribe.

Role of a Law Firm/Advisor

The IPO process in Bangladesh is complex and highly regulated, necessitating meticulous law firm strategy and implementation. A law advisor or law company can play an important part in this process by providing the following services:

A legal firm can provide thorough due diligence services to prepare a company for the IPO process.
A law advisor/firm can design and evaluate offering documentation, including prospectuses, to ensure compliance with securities legislation.
A law firm can advise on compliance with Indian securities rules and regulations, such as the BSEC guidelines.
A legal firm can help create the create Red Herring Prospectus (DRHP) in accordance with BSEC requirements. We provide a comprehensive range of services to help your firm through the IPO process, including DRHP drafting, securities legislation compliance, and offering document drafting. Our professional team of lawyers has vast experience in IPO-related law firm concerns and can provide tailored legal assistance to meet your company’s specific needs.

TRW Law Firm takes a collaborative approach to working with clients. We recognize that going public is a huge choice for your company, and we collaborate closely with you to ensure that your firm’s aims and interests are always prioritized. Our team takes the time to learn about your company and goals before providing specialized law firm services that meet your specific requirements. Our dedication to offering superior law firm services has earned us a reputation as one of Bangladesh’s leading legal firms for IPO-related problems. With our help, your company may effectively navigate the IPO process and achieve its objectives. TRW Law Firm is proud to be one of Bangladesh’s leading law firms for IPO-related problems.

Our experienced lawyers have a thorough awareness of the legal and regulatory framework surrounding IPOs, and we apply this knowledge to all aspects of our work with clients. With our collaborative approach and commitment to offering great law firm services, we can guide your company through the complexities of the IPO process with comfort and confidence.

IPO Application Process

Initial Public Offering is the process of entering into the share market for different organizations. When investors want to invest their money in these new shares, they have to go through the IPO application process. By completing the process, they will be able to apply for the IPO. If you are wondering what the process of IPO application in Bangladesh is? Then you have come to the right place.

Having a BO account is a prerequisite for applying for any IPO. Without a BO account, an individual is not eligible to apply for the IPO. Because a BO account gives an individual the authority to start trading in the stock market. If you have a BO account already, then it will be easier for you to get started with the IPO application process. If you do not have the account, then you will have to create the account first.

The next step of the IPO application process in Bangladesh is selecting the IPO you want to apply for. There can be many options available to you, but you must consider a few essential components before you apply for the IPO. In general, you can get started with the IPO application process by simply filling out an application form. You can contact your broker house to supply that application form.

You will have to put in your necessary information in the application form. One individual can have two types of accounts. Individual accounts and joint accounts are the available options for an individual. You can apply separately from these accounts. Along with the information, you might have to submit additional documents depending on the requirement of the different broker houses.

Filling out the application form is getting easier than ever. With the help of your broker house, the entire application process for IPO is simpler than before. Many broker houses offer the feature of online applications for initial public offering. In that case, you will have to follow the process that is set forth by these broker houses. All you have to do is put in the necessary information and get started with your application in just a few clicks.

Once you are done with giving your information, we will take care of the rest and update you if there is any significant outcome. The entire process of applying for an IPO through us is very customer friendly. If your BO account has the necessary amount for the application then you are good to go. For example and IPO has a lot of 200 shares and it is BDT 5000. If your BO account has the necessary amount, you can apply using that account.

The refund process is quite simple and easy to use. It will automatically be refunded to your accounts after a couple of days of the result of the IPO. To summarize, we can say that the process of applying for an IPO is very easy. It starts with selecting the IPO you want to apply for, filling in the application form with the necessary information, submitting the application, get the IPO application or else get a refund if the application is not successful.

Fees Regarding IPO

Issue management fee: maximum 1% on the public offering amount or Tk.

Documents to be Submitted

To the above documents.

Evaluation of the Draft Prospectus

The analysis begins with a brief overview of the Company. Standard method to evaluate the prospectus submitted by the applicant company. Exchange Commission (Public Issue) Rules, 2006. Summarized in this section. Placement (if any) with the amount, number of shares and offer value of the shares. This section. This history covers the amount of paid up capital with the sources i.e. bonus issue or right issue, of those capital.

A brief description of the company is provided in this section. Any investment always associates with risks. Beyond control, which may causes of loss. Take the risk factors into consideration. Section. Identified by them and provided in the Prospectus. This section. DSE that is marked. Relationship among them is also provided in this section. Company. Provided. The percentage of the securities represented by such ownership. In this section the family relationship among the directors are provided. Any family relationship among directors and top five officers. To analyzing the human aspect of the company.

In this section there are two parts. Done based on the historical data provided in the prospectus. Of Goods Sold, Operating and Net Profit, Net Assets is calculated for five years. Is given to the Dilution. Comparative performance of the company. On the Shareholders of the applicant company. Calculated by the Exchange. This part or information is provided by company. Reported figures. Identified if possible. The history of Dividend payment by the Company is provided in this section. In this section Net Tangible Asset per share is calculated. And Trademarks, less all Liabilities. Fixed assets are valuable assets for a company.

The determination of offer price is presented here. Issue Manger of the applicant Company. Price. However, the most common method is based on Net Asset Value. On the market and has the common issues similar with the applicant company, is done. Etc. In this section the summarized version of the analysis is provided. Here. This is the last section of the analysis.

Decision of IPO

Whether to allow the applicant Company to go for IPO. Committee. Company), and the recommendation is provided to the BSEC. Decision of IPO.

Department of Listing Affairs

Listing Affairs. Operations Division. Department. Headed by 1 AGM, 1 Manager and 2 Sr. The department has a vast job area to do. Taking initiatives for new listing and processing listing of Govt.

IPO Scenario Analysis

From Miscellaneous sector came to the Capital Market with Tk. Capital and raised capital Tk. 12 thousand 469 million through Initial Public oﬀering (IPO). These, 10 companies raised Tk. 7 thousand 936 million as premium. Capital Tk. 9,338.70 million through Initial Public oﬀering (IPO). Total No.

Going public is costly both in terms of money and time. Manpower devoted to preparing for a public offering can be substantial. Matters. Flotation process is also a time consuming exercise. Of operation and other material information. Particularly with actions which require shareholders' approval. Equity value for their stocks. Secondary market. Value of the shares.