IPO Process in Bangladesh

Submitted to:

Md. Lutfur Rahman Assistant Professor, Department of Business Administration, East West Universit , Dha!a.

Submitted b :

"ame Arafat Rauf

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Date of Submission: (+th De-ember $%((

IPO Process In Bangladesh

Executive Summary This term paper gives us a practical experience while passing through the theoretical understanding. The report is the result of our understanding about what are IPO and IPO listing procedure in Bangladesh. In the introduction, we have briefly discussed about IPO. What it is. In the next we have also explained the methodology regarding this report. econdary data and information have been used in preparing this report. Then comes the !nalysis part, where we have explained the listing procedure. We have divide listing procedure in two Parts according to their behavior, one is wor" before #onsent and another in wor" after consent. In the whole listing procedure, the wor"s are separable li"e wor" before IPO consent and wor" after IPO consent.

$i"e all study, this report has also certain limitations which were in some cases unavoidable. In the end we have concluded with a short discussion of overall analysis.

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IPO Process In Bangladesh

/ab.e of 0ontent
0ontent #ntrodu-tion Methodo.o1 of the Stud Ana. sis 0on-.usion Bib.io1raph Pa1e "umber * * + & (%

Introduction Initial public offering (IPO), also referred to simply as a %public offering% or %flotation,% is when a company issues common stoc" or shares to the public for the first time. They are often issued

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IPO Process In Bangladesh

by smaller, younger companies see"ing capital to expand, but can also be done by large privately owned companies loo"ing to become publicly traded. In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue &common or preferred', best offering price and time to bring it to mar"et. (or the individual investor, it is tough to predict what the stoc" or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analy)e the company. (or minimi)e the ris" and attract more investor to the mar"et The IPO has three part as mention in the following diagram. *+, general public. hares are restricted for mutual fund- another *+, shares are restricted for .on /esidence Bangladeshi &./B'- and rest of the 0+, shares are allocated for the

Methodology Of The Study We have used only secondary data source to conduct the study. The sources of secondary data are1 econdary information was collected from different web site related to IPO listing procedure in Bangladesh. We have collected much of the information through the internet and those are mentioned in the bibliography page.

Analysis !n initial public offering or IPO is a mechanism for companies to ma"e available for the first time shares of their stoc". Its purpose is to either raise capital for a new company or to fulfill a desire by an existing company to ma"e their shares available to the public. Whether it is a new or existing company, the IPO process follows a fairly straight forward path with precise steps along the way.

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IPO Process In Bangladesh

There are some instructions you have to follow to get consent from

ecurities 2xchange

#ommission. These instructions are mandatory for investors. Through this process Investor has to organi)e all the relevant information. We have divide listing procedure in two Parts according to their behavior, one is wor" before #onsent and another in wor" after consent. In the whole listing procedure, the wor"s are separable li"e wor" before IPO consent and wor" after IPO consent.

Wor"s before Obtaining the #onsent from ecurities 2xchange #ommission *' election of !dvisors1 Before applying for consent every company supposed to have section of legal advisor. $egal !dviser is responsible for ecurity of internal information. $ocal Organi)ation usually appoints only $ocal !dvisor and multinational organi)ation supposed to have two legal advisers both $ocal 3 (oreign. 4' #ompletion of 5aluation and restructuring1 Before getting consent Organi)ation will have to complete their total asset 5aluation. !nother important process is changing organi)ation6s employee management and also restructuring and obtaining /eports thereon. $isted Organi)ation6s all top level employee usually has to follow by the !uditor. 7' election of Ban"ers to the Issue1 Ban"ers $etter confirming opening of separate account for IPO and accepting their appointment as such /ule 8*0 of Public Issue /ules 4++9. Ban"ers to the issue will be the important sta"e holder and they will be responsible for deposit and withdraw money of investors. :' election of underwriters1 election of underwriters 3 completing underwriting

agreement is another essential process of IPO listing procedure. ;nderwriters are liable for successful float of all the shares. If the shares under subscribed, then underwriter will have to buy and hold that particular amount of shares. But, in case of Bangladesh #apital <ar"et =istory, It never happens besides applications are over subscribe more than *+ times of offer.

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IPO Process In Bangladesh

>' #ollection of .O# from $enders1 #ollection of .o Ob?ection #ertificates &.O#' from $enders is a mandatory to get IPO approval. $ender should have to issue a letter that if the #ompany change their existing capital structure then they will not have any ob?ection. If the company have loan from several ban"s, then it is necessary to collect .O# from all the lenders. 9' !udit of !ccounts1 Organi)ation supposed to have !udit of their accounts by authori)ed !uditor duly signed on each page, by the issuer6s chief executive officer@managing director, chief financial officer and issue manager according to the /ule 87 of Public Issue /ules 4++9. The audited account shall not be older than *4+ days of the end of the period for which the (inancial tatement is prepared. *+ copies of (inancial tatement have submitted to 2#, one copy each to A 2 and # 2. B' #redit /ating /eport1 Cenerally it ta"es at least two months to complete the #redit /ating after the !nnual !udit is completed and credit report is mandatory for IPO listing process. /ule *0 &4*' of the Public Issue /ules 4++9 says that the application for consent shall be accompanied by some exhibits including #redit /ating /eport. .o issue of shares at a premium or issue of right shares shall be made by a public company unless the issue is rated by a credit rating company and declaration about such rating is given in the prospectus or right offer document & ec.7 of #redit /ating #ompanies /ule *DD9'. 0' !greement with #AB$1 Before submission of !pplication to 2#, it is mandatory to complete agreement with #entral Aepository Bangladesh $imited &#AB$'. #AB$ maintain online transaction of securities by ta"ing some fees and they listed all the investor in toc" <ar"et. !t present there are more than *9+++++&sixteen lac investors' in Bangladesh #apital <ar"et. !fter completion of agreement now company will have to ta"e decision on depositing sponsors shares during $oc"8in8Period with #ustodial Ban" or with #AB$. D' !pproval from ponsors1 !t this point of IPO process now it is necessary to ta"e

approval from the sponsor and documentation the process, underta"ing and information from ponsors@ Airectors, Aeclarations, Aue Ailigence etc.

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*+' /efund warrant guarantee1 #ompany supposed to have opened a separate Ban" !ccount for refund warrant purpose. It also called <other !ccounts for /efund Warrant. Through this account #ompany has to refund warrant money to the investor, who will not get the share. **' Araft Prospectus1 Before applying for IPO #ompany will have to drafting the abridge version of prospectus and dealing with Printers on printing of Prospectus, (orms, /efund Warrants, $etter of !llotment etc. *4' !pplication ubmission1 !pplication has to submit to 2# for consent to Issue with

approved Prospectus and deposit the Covt. (ees of BAT *+,+++. If the application is incomplete the 2# shall inform the applicant within 40 days of receipt of application and if the issuer fails to remove incompleteness within 7+ days of communication, it shall file fresh application. &/ule 8*B of Public Issue /ules 4++9' *7' #onsent from 2#1 if the application and information, documents are provided by the applicant are reliable then 2# shall issue letter of #onsent within 9+ days of receipt of complete application. &/ule 8*B&:' of Public Issue /ules 4++9'. If the application submitted by the applicant is fresh and correct then usually it ta"es :>days to get IPO consent.

Wor"s after Obtaining the #onsent from ecurities 2xchange #ommission *' ubmission of prospectus1 !fter getting approval from 2# the first step is to submit the abridged version of prospectus in 2# for approval, usually before *+8*> days prior to opening of subscription. !nd also have to submit signed copy of the Prospectus with /egistrar of Eoint toc" #ompany &/E #' on or before the date of publication of prospectus in newspapers.& ection *70 of #ompanies !ct *DD:' 4' !nnouncement for the investor1 #ompany will have to Publish of abridged version of prospectus in : newspapers &4 2nglish F 4 Bengali' within 7 wor"ing days of the issuance of #onsent $etter &/ule >&*' of Public Issue /ules 4++9'. ! paper clipping of published !bridged 5ersion of Prospectus has to submit to 2# within 4: hours of

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IPO Process In Bangladesh

publication in newspapers. Issuer #ompany will have to submit a dis"ette containing the text of vetted prospectus to 2#, A 2, # 2 and Issue <anager and will have to post the full prospectus vetted by 2# in Websites of Issuer, 2#, A 2, # 2 3 Issue <anager within 7 wor"ing days of the issuance of #onsent $etter &/ule 9&4' of Public Issue /ules 4++9'. 7' Provide full prospectus1 Issuer #ompany will have to submit :+ copies of printed prospectus to 2# and also submit printed copies of abridged version Prospectus and application forms to Bangladesh 2mbassies by 2< newspapers. :' !pplication for listing1 !t this point !pplicant should apply to all toc" 2xchanges in Bangladesh and submit the vetted prospectus to the toc" 2xchanges within B wor"ing days from the date of issuance of the #onsent $etter &/ule *B of the Public Issue /ules 4++9'. >' ubscription period1 ubscription $ist shall be opened and sale of securities commence after 4> days of publication of !bridged 5ersion of Prospectus. &/ule 8 > of Public Issue /ules 4++9' ubscription $ist shall be closed after remain open for > consecutive ban"ing days. By ./B be made to the Issuer #ompany within the closing date so as to reach the #ompany by the closing date plus D days. 9' Transaction rate1 To apply spot buying rate &TT #lean' in ; G and ;H pound and 2uro of onali Ban" for subscription of ./Bs. pot buying rate to be collected from onali Ban" on the date of opening of subscription. B' In case of under subscription1 In case of under subscription, Issuer shall notify the underwriter to ta"e up underwritten shares. The time limitation is within *+ days of close of subscription date. (ull payment is to be made by the underwriter of underwritten amount within *> days of Issuers notice. 0' !pplication to toc" 2xchanges for $isting1 (or application for $isting issuer has to submit it to 2# attested copies of applications filed with toc" 2xchanges within B of postal departments within > wor"ing days from the date of publication of abridged version of prospectus in

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wor"ing days of issuance of consent letter &!pplication shall be made by the #ompany at least *+ days prior to issue of first Prospectus &/egulation 7 &4' of A 2 $isting /egulations'. D' !pproval of listing1 Cranting of listing applications by A 2 and # 2 for issuing the share. The 2xchange shall decide the Iuestion of granting permission within a maximum period of 9 wee"s from closure of subscription lists. &/egulation 7&7' of A 2 $isting /egulations'

Conclusion The first thing a company must do before issuing stoc" is file a registration with the ecurities and 2xchange #ommission & 2#.' ince the 2# has the power of nullifying any attempt to go public !fter &and sometimes before' the registration statement is finished, companies engage the services of one or more investment ban"ers. The role of any investment ban"er&s' is mostly twofold. (irst, it is to distribute the company6s prospectus to prospective buyers of the stoc". The second function of an investment ban"er or underwriter is to buy the company6s shares and resell them to the public. !fter 2# approval and usually a day or so before the actual public offering, the company and the investment ban"er agree on a share price and the number of shares to be sold. The offering is complete when the company receives the money and delivers the shares to the underwriter. ;nderwriters do extensive research before committing to buy a company6s securities. They ta"e on a calculated ris", essentially betting that the price per share they pay out to a company will be less than what the mar"et is willing to pay for it. Opportunities for huge profits 8and losses8 exist in this environment.

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i!liogra"hy
1. Working report on IPO consent and listing procedure in Bangladesh, see http://www.2dix.co /docu ent!pdf/ipo!pro"ect!report!pdf.php accessed #th $ece %er 2&11 2. Process of listing with $'(, see http://www.%dtradeinfo.co /%usiness/listing)dse.asp accessed #th $ece %er 2&11 *. Ipo Process In Bangladesh, see http://www.oppapers.co /essa+s/Ipo!Process!In!Bangladesh/,#1-&# accessed #th $ece %er 2&11 .. /oing Pu%lic (xperts, see http://www.goingpu%licexperts.co /0gclid123f4&5O+g6&278.a6wodd1x79: accessed #th $ece %er 2&11 ,. ;IPO consent and listing procedure in Bangladesh< see http://www.s%.iu%.edu.%d/intern)report)asadu=)=a an.pdf. accessed #th $ece %er

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