Mohammad Mufazzal

About 672 private and public limited companies raised capital worth Tk 389.95 billion in the last four years by issuing private placement shares with consent of the regulatory body, officials said.

The figures on capital raising were obtained from the sources of the Bangladesh Securities and Exchange Commission (BSEC), the Dhaka Stock Exchange (DSE) and the issuer companies when they talked to the FE.

When a company needs additional funds to carry out different activities, it issues placement shares, without going for any initial public offering (IPO), to collect the necessary money from chosen or selected private investors, on approval of the regulatory body.

As per the data, 168 private companies raised capital worth Tk 75.99 billion during the period from January 01, 2009 to May 31, 2011.

And 189 public limited companies raised capital worth Tk 159.34 billion during the period.

On the other hand, during the period from June 01, 2011 to December 31, 2012, 167 private companies raised capital worth Tk 51.89 billion and 148 public limited companies raised capital worth Tk 102.73 billion.

Of the total companies, around 400 issued placement shares in the absence of a specific guideline.

However, after framing of a guideline on issuance of private placement shares, the trend of going for this particular option for capital raising slowed down to some extent.

On October 2, 2011, the BSEC announced the guideline restricting mass-scale distribution of placement shares and introducing a one year lock-in period for sale of such stocks.

As per the guideline, the capital a company intends to collect can be raised from not more than 100 investors, who must have tax identification numbers, and it is mandatory to submit the subscribers' list to the regulator.

"After issuance of the guideline, the companies which raised capital later followed it properly," a BSEC official said.

He said after issuance of the guideline by the incumbent commission, some sort of discipline was restored in capital raising.

"Before issuance of the guideline, the companies which raised capital had a lot of options for distributing placement shares. The ownerships of placement shares also changed repeatedly. As a result, a lot of malpractices took place in distribution of placement shares," he added.

He said the companies passed a period of euphoria in distribution of placement shares before issuance of the guideline.

"But that trend of raising capital became sluggish as soon as the guideline came into effect. Some companies also applied to the regulator seeking time extension after failing to complete the distribution of placement shares within the specific timeframe as specified in the guideline," the official said.

A company has to complete the distribution of placement shares within 30 days from the date of consent given by the securities regulator.

Bangladesh Krishi Bank Chairman Khondker Ibrahim Khaled in his recent probe report blamed the mass-scale distribution of placement shares for the December (2010)-January (2011) stock market debacle.

In this regard, the BSEC Chairman Professor Khairul Hossain told the FE that under the present guideline there is no scope of wrongdoing in distribution of placement shares.

"The BSEC allows companies to issue placement shares at the face value. So the recipients will have to bear the responsibility if they purchase shares at the prices above the face value," he said.