Appropriate IPO pricing is a must to attract quality issues

Experts tell a seminar

Stakeholders placed importance on appropriate pricing of Initial Public Offerings, good tax governance and a reduced time frame for the approval of public offerings in order to incentivize good companies to to apply for a scholarship.

They made the suggestions on Sunday at a seminar titled “Barriers to Listing in the Capital Market and Ways to Resolve Them” held at a hotel in the capital.

Professor Shibli Rubayat Ul Islam and Faruq Ahmad Siddiqi, outgoing and former chairpersons of the Bangladesh Securities and Exchange Commission (BSEC), attended the program as chief guest and special guest respectively.

Seminar participants said that the narrowing tax gap between listed and unlisted companies is one of the factors discouraging companies with good fundamentals from going public.

“Due to insufficient enforcement, the laws do not play a significant role in our country. Good companies will be interested in registering for tax benefits if the tax administration could ensure the proper enforcement of tax laws companies,” former BSEC chairman Mr Siddiqi told the seminar organized by online news portal

He said good governance will need to be ensured within the tax department.

“Otherwise, no law can make it easier for good companies to register amid tax benefits,” Siddiqi said.

Currently, there is a gap of 7.50% between corporate tax paid by listed and unlisted companies. Previously, the spread was 10%.

Speaking on the jobs of auditors, Mr Siddiqi said that a company’s subsequent registration procedures will be hampered if a quality audit is not ensured.

“So quality auditing is very important, although it is hard work because many auditors do their auditing work taking into account their fees paid by companies,” Siddiqi said.

He said proper IPO pricing will need to be ensured to entice good companies to go public.

“A good company will not be interested in going public if there is no significant difference between the prices of a good and a bad company. Thus, the policy of setting an IPO price in a fair market is very important to attract good companies.”

Mr Siddiqi said companies depend on bank funding without going public, as such funding is easy compared to funds raised through the IPO.

“Banks are chasing good companies. These companies will remain reluctant to go public until banks have access to funding capacity,” Siddiqi said.

He said the government will have to come forward to remove barriers that prevent good companies from listing.

In his speech, Prof. Shibli Rubayat Ul Islam said that currently, it does not take enough time to approve an IPO proposal if the company submits the documents correctly.

“We are trying to get good companies to go public. Three good companies from big business groups are already on the verge of going public,” Islam said.

He said the companies were unwilling to increase their valuation via listing because of their so-called mindset.

“We have set up a platform for SMEs (small and medium-sized enterprises) to help them prepare for listing with major stock exchange boards,” Mr. Islam said, adding that the SME sector should have been a priority 50 years ago.

The BSEC chairman said the classification of bank loans is not business-friendly.

“Not all companies have bad intentions. There are profits and losses in business. But companies with good reputations also fall victim due to a section of bad borrowers,” Professor Islam said. .

He said that auditors will now dare to prepare window balance sheets, because surveillance has been intensified here.

“We have also stopped trading in investment stocks,” Islam said.

Referring to the incentives offered to the RMG sector, the President of the Bangladesh Merchant Bankers Association (BMBA), Md. Sayadur Rahman, said that no sector was able to see developments without availing the benefits offered by the government.

“Why should a company with a solid base be listed if there is no advantage for it?”

BMBA Chairman Mr Rahman said the corporate tax gap will need to be increased alongside the development of mandatory rules for the registration of good companies.

The President of the Institute of Cost and Management Accountants of Bangladesh (ICMAB), Md. Mamunur Rashid, delivered his keynote address at the seminar moderated by Editor-in-Chief, Amirul Islam Nayon.

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