SEC rewrites listing rules for energy firms

The stockmarket regulator has eased some IPO rules under the book building method to encourage infrastructure, power and fuel companies to go public.

Non-listed companies in the three sectors with at least a year of commercial production and profits can now raise funds from the market, according to a circular issued by the Securities and Exchange Commission (SEC) on Monday.
Previously, a company had needed at least three years of commercial operations and profits for a minimum of two years before being eligible to raise capital through the exchanges.
However, if a company wishes to float shares under the fixed-price initial public offering (IPO) method, the new, easier rules will not be applicable.
The relaxed rules will not apply to companies in other sectors. SEC officials said infrastructure, fuel and power sectors are being prioritised for economic development.
"The rules are being relaxed so that entrepreneurs in the sectors can raise funds easily and run their projects smoothly," an SEC official said.
"It will also increase the supply side in the market, which is now crying for new securities after the entry of thousands of fresh investors with thousands of crores of taka in cash.”
Although some companies listed on the stockmarket using the book building method, a modern pricing mechanism for an IPO, no companies in energy and infrastructure sectors are yet to float shares under the new system.
On Monday's circular, SEC also made another amendment to the book building rules. It said the institutional investors that will participate in fixing the indicative prices of a company's shares will also have to participate in the final bidding to discover share prices. Previously, it was not mandatory for them.
Companies with a minimum of Tk 18 crore in paid-up capital will be also be allowed to go public from now on, said the SEC circular. But the minimum size of the IPO should be Tk 12 crore, meaning a company with at least Tk 30 crore in paid-up capital, including the minimum IPO size, can go public.
A company with large capital will have to go for an IPO with minimum shares equivalent to 10 percent of total paid-up capital and IPO size.
For example, if a company's existing paid-up capital is Tk 150 crore and it wants to raise Tk 10 crore from the stockmarket, its IPO size should be at least Tk 16 crore, which is 10 percent of Tk 160 crore.
The circular said the market lot of shares will have to be equivalent to Tk 1,000 or multiplied. For example, if a company's share face value is Tk 10, the market lot must be 100 shares, but if a company's share face value is Tk 100, the market lot will have 10 shares.
-Daily Star