IPO PROCESS IN BANGLADESH

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IPO PROCESS IN BANGLADESH
A REPORT OF FINANCIAL INSTITUTIONS AND MARKETS
COURSE CODE: FIN- 4101
SUBMITTED TO:
MOHAMMAD BAYEZID ALI
ASSOCIATE PROFESSOR
DEPARTMENT OF FINANCE
JAGANNATH UNIVERSITY, DHAKA
SUBMITTED BY:
RASEL AHAMED
REPRESENTATIVE OF GROUP 6
ID NO: B-120203047
SESSION: 2012-2013
DEPARTMENT OF FINANCE
JAGANNATH UNIVERSITY, DHAKA
DATE OF SUBMISSION: 27 OCTOBER 2016

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MEMBERS OF GROUP: 6
SL ID NAME
1. B-120203032 RAJIB HUSSAIN
2. B-120203034 ASIBUL ISLAM MILU
3. B-120203043 TAJRIMA SULTANA SRISTI
4. B-120203045 MOHAMMAD WASHIM
5. B-120203047 RASEL AHAMED
6. B-120203051 SHARIF ASRAFUL HAQUE
7. B-120203055 MD. SUJON BHUIYAN
8. B-120203071 GAZI RAFSAN SHAHAB
9. B-120203082 MAHEDI HASAN SAGAR ZOARDER
10. B-120203137 AFRIN KHAN
11. B-110203091 EHSUN HOQUE

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Letter of Transmittal
27th October, 2016
Mohammad. Bayezid Ali
Associate Professor,
Department of Finance,
Jagannath University, Dhaka.
Dear Sir,
With great pleasure, we have submitted this analysis report that we have been assigned to us as
an important requirement of BBA program at Jagannath University. We have found the study to
be quite interesting, beneficial and knowledgeable. We have tried our level best to prepare an
effective & creditable report.
This report is about the Process of IPO (Initial Public Offering) in Bangladesh. The report was
completed on the basis of Theoretical & Analysis learning.
We also want to thank you for your support and patience with us and we appreciate the
opportunity provided by Jagannath University and Department of Finance to work on this
wonderful project.
Yours sincerely,
On behalf of the group,
…………………………………………………….
Rasel Ahamed
ID: B-120203047

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Acknowledgement
We would like to express our gratitude to all the people that were involved both directly
and indirectly in the preparation of this report. We apologize to the people whose names that we
have not mentioned, and their contribution is highly appreciated by us.
At first, we would like to thank our academic supervisor, Mohammad. Bayezid Ali - Associate
Professor, Jagannath University – for guiding us and for giving us the opportunity to initiate this
report. More specifically, we would like to thank him for imparting her time and wisdom.
Finally, we would like to thank our parents and friends whose influence and inspiration have
enabled us to complete this report.

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Executive Summery
Capital market ensures efficient transfer of resources from savers to borrowers. It ensures
this through the bourses it has. The Capital Market of Bangladesh is the subject of discussion in
the first chapter. The journey of our capital market begins in 1954. It is constituted with securities
& non-securities segment. The securities segment is constituted with two bourses namely Dhaka
Stock Exchange Limited (DSE) &Chittagong Stock Exchange Limited (CSE) as well as the
regulator namely Securities &Exchange Commission The securities market is regulated by many
laws & by-laws. Small number of listed issues, small numbers of investors, low liquidity level,
information asymmetry – all these characters are the salient features of capital market of
Bangladesh. This are the issues discussed in the first chapter.
In the second chapter an overview on the prime bourse of the country- DSE is provided. DSE was
established as East Pakistan Stock Exchange Association Limited on April, 1954 although formal
trading begun in 1956. Chief Executive Officer (CEO) is the head of the management. At present,
DSE is performed various activities related to the capital market through 26 departments under 4
divisions. The major departments are Surveillance, Listing Affairs, Market Operations,
Monitoring, Investigation, and Compliance & Legal Departments etc. DSE is going to shift at its
second building at Nikunja within a short time. DSE has announced its 5 year plan namely DSE
Vision-2013.
IPO denotes the means of collecting funds from the public through public offering procedure. In
Chapter three different aspects regarding IPO of companies, i.e. meaning, types, advantages of
IPO (from the view point of both the Companies and the Investors), Book-Building System, IPO
Requirements, Documents to be Submitted, Evaluation of the Draft Prospectus are discussed.
The present procedure of IPO is briefly described in the later chapter. Later on more discussion is
done on the Evaluation of Draft Prospectus and the Decision making process by the Exchange. In
the following chapter a case study based on the Golden Harvest Agro Industries Limited has been

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provided to illustrate the Evaluation of Draft prospectus done by the Department of Listing Affairs
on behalf of the Exchange.
Some performance analysis of the securities floated by IPO in 2012 is presented in the fifth chapter.
This analysis is basically done by comparing market return and variance withthe securities floated
by IPO. And finally correlation among securities is presented. In the concluding chapter different
problems of the capital market of Bangladesh are identified. Finally, some recommendations for
making the capital market more active &efficient have been provided to conclude the chapter as
well as the report.

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Contents
CHAPTER 1 ................................................................................................................................... 1
1.1 INTRODUCTION ................................................................................................................ 2
1.2 BACKGROUND OF THE STUDY..................................................................................... 3
1.3 OBJECTIVES OF THE STUDY.......................................................................................... 4
1.4 METHODOLOGY OF THE STUDY .................................................................................. 5
1.5 LIMITATIONS OF THE STUDY........................................................................................ 6
CHAPTER- 2.................................................................................................................................. 7
2.1 CONCEPT OF PO................................................................................................................ 8
2.2 TYPES OF PO...................................................................................................................... 8
2.3 Types of IPO......................................................................................................................... 8
2.4 ADVANTAGES OF IPO.................................................................................................... 10
2.6 FEES REGARDING IPO ................................................................................................... 11
2.7 DOCUMENTS TO BE SUBMITTED ............................................................................... 12
2.8 THE IPO PROCESS........................................................................................................... 13
2.9 EVALUATION OF THE DRAFT PROSPECTUS............................................................ 15
2.10 DECISION OF IPO .......................................................................................................... 19
2.11 DEPARTMENT OF LISTING AFFAIRS ....................................................................... 21
2.12 IPO SCENARIO ANALYSIS .......................................................................................... 22
CHAPTER- 3................................................................................................................................ 23
3.1 PROBLEMS REGARDING IPO PROCESS..................................................................... 24
3.2 RECOMMENDATIONS.................................................................................................... 25
3.3 CONCLUSIONS................................................................................................................. 27
3.4 REFERENCES ................................................................................................................... 29

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1.1 INTRODUCTION
Initial public offering (IPO) also referred to simply as a "public offering" or "flotation," is
when a company issues common stock or shares to the public for the first time. They are often
issued by smaller, younger companies seeking capital to expand, but can also be done by large
privately owned companies looking 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 market.
For the individual investor, it is tough to predict what the stock 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
analyze the company. For minimize the risk and attract more investor to the market The IPO has
three part as mention in the following diagram. 10% Shares are restricted for mutual fund; another
10% shares are restricted for Non Residence Bangladeshi (NRB); and rest of the 80% shares are
allocated for the general public.
We have used only secondary data source to conduct the study. The sources of secondary
data are: Secondary 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.

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1.2 BACKGROUND OF THE STUDY
Capital market is absolutely a vital consider for the proper functioning of capitalistic
economy, since they serve the channel funds from savers to borrowers. The securities market
allows sound listed companies to raise additional capital quickly and cheaply, as they enjoy
reputation. A vibrant and liquid securities market encourages increase in savings by offering
attractive and rewarding securities in terms of higher return, lower risk and easy option for
conversion to cash. Investors in Bangladesh became increasingly interested in equity markets
because many entrepreneurs look for requirements from the equity markets for many reasons. In
this connection Dhaka Stock Exchange Limited plays an integral part of the industrialization of
the country. For this regard floating securities through IPO in the stock market is very analytical
task and the whole procedure is the main focus of this report.

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1.3 OBJECTIVES OF THE STUDY
The main objective of the report is to comprehensive study on Dhaka Stock Exchange
Limited – its overall functions, detailed procedure of IPO, and to find out the problems inherent
with this. The following are the other objectives of the study-
To get an overall idea about the capital market of Bangladesh.
To get a fundamental idea about Dhaka Stock Exchange Limited and its activities.
To identify the advantages and disadvantages of IPO Process.
To identify the requirements to be fulfilled by the companies for collecting capital through
IPO.
To discuss the analyzing process of the Draft Prospectus submitted by the companies
willing to be held for IPO.
To know the performance of the post IPO companies.
To know the relationship of the company having IPO with market index.
To understand the role of Stock Exchange Market for the development of the economy of
Bangladesh.
To discuss the problems still prevailing in the Capital Market of Bangladesh.

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1.4 METHODOLOGY OF THE STUDY
The task of business research is to generate accurate information for use in decision
making. Business research is defined as the systematic and objective process of gathering,
recording, and analyzing data for aid in making business decisions. There are two types of
research.
Basic research is intended to expand the boundaries of knowledge itself or verify the
acceptability of a given theory.
Applied research is conducted when a decision must be made about a specific real life
problem. Applied research encompasses those studies undertaken to answer questions about
specific problems or to make decisions about a particular course of action or policy. This research
type is basic research as I am trying to expand our boundaries of knowledge of the IPO process.
From the view point nature of data the research is qualitative research.
This research will be focusing on both the secondary & primary data.
Secondary Data source
Annual report of the DSE.
Monthly review of DSE.
Prospectus of Direct Listing companies.
Different publications regarding IPO.
Extensive literature search on the basis of these documents of publication.
www.dsebd.org and other relevant websites.
Primary Data source
Face to face conversation with the respective officers and Staff of DSE.
Oral interview of the responsible officers.
Relevant document’s studies as provided by the officers concerned.
Observation of department of DSE.

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1.5 LIMITATIONS OF THE STUDY
In preparing the internship report I have faced some problems which are mentioned below-
IPO process is mainly descriptive and little scope for analysis.
Sufficient books, publications and journals were not available.
Insufficiency of necessary information and data.
Sometimes officials deny disclosing some information as to maintain secrecy.
Improper combination among various departments.
Up-to-date information was not available.
Unwillingness to give information more because of extra harassment that are without their
responsibility.

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CHAPTER- 2
IPO PROCEDURE ANALYSIS

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2.1 CONCEPT OF PO
Public Offering (PO) means collecting funds for capital from the public. It is one of most crucial
sources of getting funds collected.
2.2 TYPES OF PO
Mainly, there are two types of public offering namely seasoned public offering and initial public
offering (IPO). The first one represents the fact when a company having already floated securities
through IPO further collects funds from public through public offering. On the other hand, IPO is
the process of collecting fund for the first time in the market.
2.3 Types of IPO
a) FIXED PRICING METHOD
Under fixed price method, the company cannot fix up its price for IPO. Rather regulatory body i.e.
BSEC fixes up the price. In accordance with SEC Ordinance, 1969, this price has been fixed as
TK 10. There remains no chance for manipulating price under this system.
b) BOOK-BUILDING SYSTEM FOR INITIAL PUBLIC OFFER
In a major shakeup in the capital market, the Securities and Exchange Commission introduced
book-building system for initial public offer. Book Building alternative to fixed price system is
basically a capital issuance process used in initial public offer and during the period for which the
book for the IPO is open, bids are collected from investors at various prices, which are above or
equal to the floor price.
The SEC introduced book-building system for IPO to attract national and multinational companies
which want competitive price of their initial offers. A SEC technical committee consisting
representatives from major stakeholders of the capital market is working to expedite the process
for the introduction of the book-building system. Commission asked the technical committee to
scrutinize ins and outs of the proposed book-building system and place its report to the commission
soon.
At first, the BSEC consultative committee prepared a draft policy guideline on book-building
system and made recommendations to the commission for introducing the system which ensures
competitive pricing of company’s IPOs. Different financial institutions and business houses
including the Bangladesh Bank, chamber bodies and merchant bankers gave their inputs in
preparing the draft policy guideline. The book-building system would encourage multinational
companies to raise capital from the capital market. The multinational companies prefer book-

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building system as an appropriate policy to ensure proper pricing of their stakes before going
public.
However, the commission would also keep its existing system of IPO fixed price system.
Under the proposed book-building system, the underwriters will buy all shares to be floated by a
business enterprise in the stock markets through competitive bidding. Underwriters will then
choose some seller groups or brokers to put up those shares for sale to retail investors. The share
issuing companies will get their share prices from the underwriter who will be the highest bidder
in the bidding process.

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2.4 ADVANTAGES OF IPO
FROM THE VIEW POINT OF THE COMPANY
The advantages reaped by the Companies from IPO are as follows-
 The company enjoys concessions under Direct Tax laws as such companies are known as
companies in which public are substantially interested resulting in lower rate of income-
tax payable by them.
 Financial Institutions/Bankers extend term loan facilities in the form of domestic currency
and foreign currency loan.
 It ensures wide distribution of shareholding thus avoiding fears of easy take-over of the
organization by others.
 It reduces the reliance on debt financing as borrowing and their prescheduled compulsory
debt servicing could be avoided if the company is listed on the bourse.
 The company gains national and international importance by its share value quoted on the
stock exchanges.
FROM THE VIEW POINT OF THE INVESTORS
 The management of a public company must be accountable to their shareholders, which in
turn play a role in ensuring that the company operates in an efficient manner. Shareholders
will be benefited from the enhancement of the company's operational efficiency.
 Since securities are quoted; there is no secrecy of the price realization of securities sold by
the investors.
 The rules of the Sock Exchange protect the interest of the investors in respect of their
holdings.

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2.6 FEES REGARDING IPO
1. The following fees shall be applicable for payment by the issuer company:-
(i) Issue management fee: maximum 1% on the public offering amount or Tk. 20 Lacs
whichever is lower.
(ii) Underwriting fee shall be calculated on 50% of public offer amount, and the said amount
shall not exceed 1% on the amount underwritten.
(iii)Bankers to the issue fee: maximum 0.1% on the amount collected against public offering
applications.
(iv) Fees to SEC:
a) The issuer company shall pay Taka 10,000 (non-refundable) as application fee
along with the application for consent of the Commission to issue or offer of
securities, by way of a pay order or demand draft issued in favor of the “Securities
and Exchange Commission”; and
b) Upon according of consent by the Commission to issue prospectus, the issuer
company shall pay consent fee @ 0.15%, by way of a pay order or demand draft
issued in favor of the “Securities and Exchange Commission”, on the amount of
public offering.
2. No seal commission shall be paid to any persons including the members of the stock
exchanges.

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2.7 DOCUMENTS TO BE SUBMITTED
According to the Regulations the applicant company has to submit some documents duly certified
by the Company or the Authorized Representative presenting the security to the Exchange.
Generally, the following documents have to be submitted in addition to the application form-
Memorandum & Articles of Association
Copy of the Certificate of Incorporation
Copy of the Certificate of Commencement of Business
Copy of the certificate of registration of the industrial Units
Copies of all material contracts and agreements entered into
Copies of Letter(s) of Credit established in favor of Machinery Suppliers (if linked with
the public issue).
Copy of Consent order issued by the Commission
Names of Directors along with directorship of other companies listed on the Exchange
Draft prospectus/Offer for sale
Auditors Certificate for the amount subscribed by the promoters/ directors/ subsidiaries/
associates
Copy of underwriting agreement (if any);
Statement of audited accounts for the last 5 years or for a shorter number of years if the
company is in operation only for such shorter period
Statement showing the cost of project and means of finance
Copies of the approval of tax-holiday application under Ordinance, 1984
Copies of the consent Letters from Bankers/Financial Institution to the Issues
Application for submission of Undertaking and payment of fees
Copy of approval of prospectus/offer for sale from Commission
However, in case of a new project a Copy of the Feasibility Report should be submitted in addition
to the above documents. Beside this, if there is any agreement relating issue to securities for
consideration other than cash then a Copy of such agreement has to be submitted.

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2.8 THE IPO PROCESS
Bangladesh Securities and Exchange Commission took initiatives to simplify the IPO process and
to reduce the time requirements from public subscription to listing application for the convenience
of the investors. as part of this eﬀort, BSEC met with representatives of top brokerage houses,
merchant banks and concerned TreC Holders several times to get their opinions. Opinions were
collected on the issues how a company could be listed within a short period of time and how to
eliminate refund related complexities.
Under the newly approved IPO subscription guidelines, IPO subscription of Hamid Fabrics started
on September 28, 2015 as the first issue under a pilot project. 151brokerage houses of DSE and 16
merchant banks took part in the pilot project complying with BSEC guidelines. subsequently
National Feed Limited, C & a Textile, Ifad autos, Shasha denims, Zahin spinning and BSRM
also completed the IPO subscription process under the pilot project. In the meantime, all
brokerage houses of DSE have become eligible to compete in the IPO subscription process.
Accordingly on May 25, 2015, DSE completed fully the IPO subscription of Aman Feeds with all
the brokerage houses. DSE is entitled to receive IPO data transmission fee @ Tk. 2,00,000 from
every issuer company under the guidelines for performing the IPO related tasks.
The companies are required to complete certain procedure to get permission for raising capital
through IPO on the Dhaka Stock Exchange. The present procedure f this can be described briefly
as follows-
APPOINTING THE ISSUE MANAGER
Every company intending to get permission for raising capital through IPO to DSE by issuing its
securities is required to appoint Issue Manager to proceed with the listing process of the company
in the Exchange.
SUBMITTING THE DRAFT PROSPECTUS
The Issue Manager prepares the draft prospectus of the company as per Public Issue Rules of SEC
and submits the same to the SEC and the Exchange(s) for necessary approval.
MAKING AGREEMENT
The Issuer is also required to make agreement with the Underwriter(s) and Bankers to the Issue
for IPO purpose.
ANALYSIS OF DRAFT PROSPECTUS BY THE EXCHANGE
After receiving the draft prospectus, the Exchange examines and evaluates overall performance as
well as financial features of the company which may have short term and long term impact on the
market.

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ANALYSIS BY SEC
The Exchange sends its opinion to SEC within 15 days of receipt of draft prospectus for SEC's
consideration. And SEC evaluates the different aspects of the Company as well as it also considers
the Recommendation provided by the Exchange regarding this.
RECEIVING SEC’S CONSIDERATION
After proper scrutiny and analysis, the Securities & Exchange Commission (SEC) gives it consent
for floating IPO as per Public Issue Rule.
FILLING LISTING APPLICATION
Having consent from SEC, the Issuer is required to file application to the Dhaka Stock Exchange
for listing its securities within 5 days of issuance of its prospectus.
SUBSCRIPTION
The next step is opening the subscription to the general people. After a successful subscription,
the company is required to complete distribution of allotment/refund warrants within 42 days of
closing of subscription.
PLACEMENT OF LISTING APPLICATION
After 100% distribution of shares/refund warrants and compliance of other requirements, the
application for listing filed by the Issuer Company is placed to the Exchange's meeting for
necessary decision of the Board of the Dhaka Stock Exchange.
DECISION OF LISTING
The Board of Dhaka Stock Exchange takes the decision regarding listing/non-listing of the
company which must be completed within 75 days from the closure of the subscription.
IPO DATA TRANSMISSION SOFTWARE DEVELOPMENT
A software system was designed and implemented to collect IPO related files from all TreC Holder
in a single store for further processing as well as to redistribute to the corresponding TreC Holders'
houses after processing in collaboration with listing aﬀairs department. Go-live of this IPO data
Transmission software was on 23rd March 2015. This solution is now running successfully

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2.9 EVALUATION OF THE DRAFT PROSPECTUS
Basically, while analyzing the different aspects of the applicant company different issues may
come in front. However, the Exchange, especially the Department of Listing Affairs, follows a
standard method to evaluate the prospectus submitted by the applicant company. The method is
described as follows-
PREPARING THE CHECKLIST
A checklist is prepared by the Department before starting the analysis of draft prospectus.
This checklist ensures whether the prospectus is prepared according to the Security and
Exchange Commission (Public Issue) Rules, 2006. Page numbers of items under each section of
the rule are also included in this checklist.
OVERVIEW OF THE COMPANY
The analysis begins with a brief overview of the Company. In this section a brief overview on the
Date of Incorporation, Commencement of Business, Authorized Capital, and Paid up Capital of
the company is provided.
DETAILS OF THE ISSUE
A detail of the issue, for which the Applicant Company has submitted the Draft Prospectus, is
summarized in this section. This section covers the public offering as well as the as the private
placement (if any) with the amount, number of shares and offer value of the shares. All data is
available in the prospectus.
NAME OF THE ISSUEMANAGER, &INDEPENDENT AUDITOR
In this section the name of the Issue Manager and the Independent Auditor is provided.
HISTORY OF PAID UP CAPITAL
A history of the paid up capital for the company (if available) for a 5-year period is provided in
this section. This history covers the amount of paid up capital with the sources i.e. cash issue,
bonus issue or right issue, of those capital. Any remark is also provided in this section related to
the paid up capital.
PAID UP CAPITAL AFTER IPO
The main objective of this section is to provide an overview on the Post IPO Paid up
Capital assuming the company will be allowed to go for offering.

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COMPANY DESCRIPTION
A brief description of the company is provided in this section. The operation of the
Company, amount of Authorized capital, special features, name of the foreign countries in which
the company exports its products (in case of an exporter company) are provided in this section.
Basically, this information is available in the prospectus.
RISK FACTORS
Any investment always associates with risks. Among those risks some can be averted, others are
beyond control, which may causes of loss. Before making any investment decision, Investor should
take the risk factors into consideration. Major such factors are identified and provided in this
section. However, the basis of this section is the management perception about different risks
identified by them and provided in the Prospectus. The Stock Exchange provides some remarks if
there is any difference between the Management’s perceptions about risks and the DSE’s
perception.
BOARD OF DIRECTORS
The name of the Board of Directors and their involvement in other businesses are summarized in
this section. If there is any involvement of any director with other companies which are listed on
DSE that is marked. An overview on the shareholding structure of the Directors and the family
relationship among them is also provided in this section. This can be called as analyzing the Human
Aspect.
SHAREHOLDING STRUCTURE
Another process of analyzing the human aspect is analyzing the shareholding structure of the
company. In this section the Percentage of holding shares by the directors of the company is
provided. Basically, according to Securities and Exchange Commission (Public Issue) Rules, 2006,
the company has to provide the name and address of any person who owns, beneficially or of
record, 5% or more of the securities of the issuer, indicating the amount of securities owned, and
the percentage of the securities represented by such ownership. From this shareholder’ list the
percentage of holding of shares by the Chairman and Directors are sorted and presented.
FAMILY RELATIONSHIP AMONG THE DIRECTORS
In this section the family relationship among the directors are provided. Basically, the information
is available in the Prospectus as according to Securities and Exchange
Commission (Public Issue) Rules, 2006, the company has to provide the information regarding
any family relationship among directors and top five officers. The main purpose of this section is
to analyzing the human aspect of the company. A strong family bonding among the directors put
a negative impression on the company.

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PERFORMANCE AT A GLANCE
In this section there are two parts. In the first part, the performance analysis of the Company is
done based on the historical data provided in the prospectus. Generally, Growth of Turnover, Cost
of Goods Sold, Operating and Net Profit, Net Assets is calculated for five years. Special attention
is given to the Dilution. Diluted EPS and Net Asset Value per share are calculated to consider
comparative performance of the company. Dilution is also done by considering the after IPO effect
on the Shareholders of the applicant company. The second part deals with different ratios
calculated by the Exchange. The ratios include Return on Equity (ROE), Return on Assets (ROA),
Profit Margin, Asset Utilization, Equity Multiplier, Debt Equity ratio, Time Interest Earned etc.
the performance analysis is done to consider the past performance of the applicant company which
would allow considering the probable future performance of it.
SELECTED RATIOS
This part or information is provided by company. The purpose of focusing this section is to find
or justify any deviation between the calculated figures in the previous section and the company
reported figures. If there is any significant deviation found, the possible reasons behind that are
identified if possible. Otherwise, the proper explanation of such deviation is asked to the Company.
DIVIDEND INFORMATION
The history of Dividend payment by the Company is provided in this section. Both the Cash and
Stock/Bonus dividend payment are presented here.
NET TANGIBLE ASSET PER SHARE
In this section Net Tangible Asset per share is calculated. Basically, Net Tangible Asset is
calculated as the Total Assets of a Company minus any Intangible Assets such as Goodwill, Patents
and Trademarks, less all Liabilities. However, this calculation is provided in the prospectus.
However, the Exchange calculates and focuses on the Diluted Net Tangible Asset per share to
consider the after IPO effect on the Tangible Assets for the Company.
DESCRIPTION OF FIXED ASSETS
Fixed assets are valuable assets for a company. To consider the strength of the company a
description of the fixed assets are provided in this section.
DETERMINATION OF OFFER PRICE
The determination of offer price is presented here. Basically, the offer price is determined by the
Issue Manger of the applicant Company. There are various methods of determining the offering
price. However, the most common method is based on Net Asset Value. If there is any objection
by the Exchange, that is provided in the analysis.

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COMPARISON
A comparison between the applicant company and other companies, already having IPO completed
on the market and has the common issues similar with the applicant company, is done. The basic
issues being compared are the Turnover, Cost of Goods Sold, SG&A, and Diluted NAV & EPS
etc. the current market prices for the listed companies are also provided to forecast roughly the
probable market price of the upcoming securities.
DSE OBSERVATION
In this section the summarized version of the analysis is provided. The key points are provided
here. That means the findings through the analysis are provided in this section.
RECOMMENDATION
This is the last section of the analysis. In this section the Listing Committee of Dhaka Stock
Exchange provides a Recommendation regarding the listing of the applicant company.

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2.10 DECISION OF IPO
Basically, the Securities & Exchange Commission (SEC) has the full authority to take decision
whether to allow the applicant Company to go for IPO. It may happen that in spite of negative
recommendation from the Exchange the company obtains the permission from SEC to go for IPO.
In that case the Exchange has the authority to reject the Listing of such company.
The process of analyzing the prospectus and decision taken by the exchange can be shown in the
following flow chart-
Issuer (Submission of
Prospectus)
Expert Panel
Department of
Listing Affairs
Securities &Exchange
Commission
Consent for
IPO/rejected
DSE Board
Q
u
e
ri
e
s
C
o
n
s
e
nt
Recommendation
Recommendation for Listing

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The Listing department, after analyzing the Prospectus, provides the recommendation to the listing
committee. The discussion is done, may be for several times (sometimes queries are made to the
company), and the recommendation is provided to the BSEC. BSEC, after analyzing, gives the
decision of IPO. The Exchange then decides whether to accept the decision by giving accordance
of the permission for IPO or reject the decision by doing otherwise.

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2.11 DEPARTMENT OF LISTING AFFAIRS
The department through which the companies get entry into the Capital Market is Department of
Listing Affairs. With a vision of getting the best companies to be listed and keeping the all listed
companies as transparent and compliant as possible and safe guard investors’ interest doing all
these at all costs the Listing Affairs Department was established in October 5, 2008 under
Operations Division. Before the date the department was named Listing & Market Operations
Department. Headed by 1 AGM, 1 Manager and 2 Sr. Executives this department has five
employees remaining busy with their jobs.
The department has a vast job area to do. Some of the major functions of this department are as
follows-
Corresponding with the listed companies regarding compliance.
Maintaining AGM/ EGM and other relevant data in collaboration with R&D and DSE
Library.
Visiting listed companies as per instruction or randomly and also visiting prospective
companies that may get listed.
Taking initiatives for new listing and processing listing of Govt. Bonds.
Processing and evaluating of the draft prospectus/Information Documents for different
upcoming companies for IPO/Direct Listing.
Preparing comments based on Draft Prospectus/Information Documents for listing
committee of DSE and thereby intimating to SEC on behalf of DSE upon DSE Board
approval.
Arranging listing committee meeting, agenda and minutes
Assuring impartial IPO lottery (if any) by sending representatives
Corresponding with the companies (issuer) and issue managers regarding IPO Direct
Listing issues.
Arranging Listing Agreement Signing and First Trading ceremonies for newly companies.
Preparation of System Files/database for newly listed companies (through IPO/ Direct
Listing).
Evaluating and processing gift of shares.
Take necessary steps for different Training Programs/ Workshops/ Seminar/Symposium/
Workshop/ Road show etc.
Listing promotional activities & maintaining information base of defaulter companies.
Updating the web department of ICT Division with relevant information for the DSE
website and

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FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15
17 16 14 16 16
FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15
16,803.00 16,238.23 9,104.00 9,338.70 12,469.72
Carrying out any delisting related process.
2.12 IPO SCENARIO ANALYSIS
During 2014-15 financial year, sixteen companies including 1 Mutual Fund, 5 from, engineering
sector, 5 from Textile sector, 1 from Fuel & Power sector, 1 from services and real estate and 1
from Miscellaneous sector came to the Capital Market with Tk. 16 thousand 930 million paid up
capital and raised capital Tk. 12 thousand 469 million through Initial Public oﬀering (IPO). Of
these, 10 companies raised Tk. 7 thousand 936 million as premium. On the other hand, in 2013-14
financial year, sixteen companies including 1 from Financial sector, 3 from engineering sector, 1
from Food & allied sector, 6 from Textile sector, 2 from Pharmaceuticals & Chemical sector, 1
from Fuel & Power, 1 from Paper & Printing sector and 1 from Travel & Leisure sector raised
capital Tk. 9,338.70 million through Initial Public oﬀering (IPO). Of these, 6 companies raised
BDT 4,375 million as premium.
Total No. of IPOs
Capital Raised through IPOs (million BDT)
0
2
4
6
8
10
12
14
16
18
2011 2012 2013 2014 2015
Series 1 IPO Subscription

23 | P a g e
CHAPTER- 3
PROBLEMS, RECOMMENDATIONS &
CONCLUSIONS

24 | P a g e
3.1 PROBLEMS REGARDING IPO PROCESS
THE COST ASPECT
Going public is costly both in terms of money and time. Accounting, legal, printing, travel,
manpower devoted to preparing for a public offering can be substantial. There are numerous
additional expenses annually, including audited financial reports, preparation and distribution of
proxy materials, quarterly and annual reports to shareholders, fees for transfer agents, public
relations, and other costs, including the time required by a company officers devoted to these
matters. In addition to the upfront costs of the IPO, there are also costs of maintaining a quote
on stock exchanges.
THE TIME ASPECT
Flotation process is also a time consuming exercise. Because of red-tapism and other lengthy
processes, it might take six months to years to complete the IPO process fully.
DISCLOSURE OF INFORMATION
When a company moves from private ownership to public, much information must be disclosed
- for instance, salaries, transactions with management, sales, profits, competitive position, mode
of operation and other material information. The companies may find it against their business
secrecy.
LOOSING FLEXIBILITY
Management of the company may lose some flexibility in managing the company's affairs,
particularly with actions which require shareholders' approval. The company may not have the
ability to act quickly if approval is required by shareholders or outside directors.
CURRENT IPO PROCESS
Due to the current process of IPO most of the time the companies are not getting the actual
equity value for their stocks. The companies further allege, and sometimes correctly, that it is the
IPO Hunters who benefit from the current system by selling the shares when they win it in the
lottery and sell the shares at a much higher price (even 6 to 8 times of the face value) in the
secondary market. When they are traded the issuing Companies get nothing except the face
value of the shares. So, the companies are not getting interest in IPO.

25 | P a g e
3.2 RECOMMENDATIONS
A strong capital market acts as a vehicle for growth of the economy. Listing of companies with
well fundamentals ensures this growth for the economy. So, proper steps should be taken to
ensure the listing of good companies. The total listing procedures as well as the analysis
procedure of draft prospectus have got some sort of problems. The following recommendations
can minimize the problems-
The regulatory bodies can highlight the benefits of IPO such as tax advantages, lower cost
fund raising etc. so that more firms become willing for listing in the stock market.
The depth, breadth & liquidity of our capital market should be increase so that more firms
become willing to enter into the market through IPO.
The whole procedure of IPO process should be arranged quickly enough by which new
companies could be inspired to raise necessary fund in a timely manner.
IPO awareness program should be arranged after certain interval by the DSE management
to send the message of listing advantages to the entrepreneurs.
The risk of losing control or flexibility can be minimized by limiting the number of shares
sold to the public, seeking to ensure a broad distribution of shares to the public, creating
different ranked classes of stock with differential voting rights, entering into voting
agreements among pre-IPO shareholders, adopting supermajority provisions or
staggering the terms of the directors.
The rules of Direct Listing regarding the disposal of shares need modification.
There should be a time period within which all firms have to offload their all shares
mentioned in the information documents for offering directly.
To increase the liquidity of the market, derivative instruments such as Futures &
Options should be introduced with the existing bond market by introducing Derivative
instrument rules and their listing procedure.
Information documents should be analyzed carefully to overlook any discrepancy in the
information provided and thereby prohibit the fundamentally weak company into listed
in the stock exchange.

26 | P a g e
To make the market more efficient, weak companies should be de-listed by the listing
authority.
Bring the State Owned Enterprises, large local companies and telecommunication
companies to the capital market through enforcement of the recently considerable book
building method.
The process of selling shares initially to a corporation should be prohibited by making laws
so that both the issuers and the general investors can get the benefit.
The standard procedure for analysis of draft prospectus also has got some problems or
weaknesses. Basically, the analysis is a prospectus based analysis. The risk factors
identified and the data provided in the prospectus are considered to be enough for
analysis purpose. The Exchange should spread its focusing area from the prospectus to
the analysis based on the external factors which might not be present in the Prospectus.
It is a matter of hope that Query Response method has been introduced in the analysis
process recently. However, proper SWOT analysis and a little focus on the Forecasting
should be ensured by the Exchange while analyzing the Draft Prospectus.

27 | P a g e
3.3 CONCLUSIONS
Our economy is starving for a matured and stable capital market. The stability came through a
variety of sources namely, educated retail investors, institutional investors and capital market
regulators. Through various forms of reforms and automation the capital market of Bangladesh
won the confidence of investors from all walks of life. In addition to that, the government
facilitated our capital market by structuring its monetary and fiscal policies in a pro-capital
market manner.
Our emerging economy mostly invited the funds from all over the globe. Market capital has
shown amazing growth. Although current market price earnings ratio is higher than that of the
neighboring country but it is my belief that considering the demand for lack of avenue to invest,
the capital market of our country has a bright and attractive future and untapped sector.
From the present point of time the future seems bright, not only because of our vibrant capital
market but also of our room for new products. With the introduction of direct listing and fixed
price method, our primary market is improving in line with the secondary market. The market
capitalization will grow significantly within next few years and turnover shall reach an
international level. Generally, the main reason for a company to obtain a listing is to gain wider
access to capital. The ability to raise finance remains the single most important facility that a
listing provides. Entrepreneurs or families descended from entrepreneurial founders have
enjoyed and benefited from the enhanced marketability of shares that comes with a public
offering. Flotation gives those backers an exit- either at the time of listing or subsequently but
some care has to be taken not to appear greedy. The Mutual Fund Investment is attracting more
popularity. The managers of these funds are sensitive the notion that pre-float backers may be
cashing in chips and leaving them with overpriced shares.
The IPO has got some disadvantages also. It brings cost and obligations that could be off-putting.
There are costs associated with gaining quotation. Significant amounts of management time can
be taken up fulfilling the obligation that goes with IPO, too. Moreover, reporting requirements
can mean the surrender of personal privacy and there are complaints of undervaluing some
shares in the market.

28 | P a g e
However, though there are some drawbacks of IPO we can sum up that an IPO provides the
opportunity for greater firepower in the market. Increased visibility and liquidity gives a
competition with it a certain amount of prestige for a firm, helping it to attract and retain highly
qualified staff. Importantly, an Exchange listing enables tracking of the market’s perception of a
company’s performance and strengthens the focus on shareholder value.

29 | P a g e
3.4 REFERENCES
 www.dsebd.org (the official website for Dhaka Stock Exchange Ltd.)
 www.secbd.org (the official website for Securities & Exchange Commission)
 Dhaka Stock Exchange Ltd.- Annual Report, 2015
 Chandratre, K.R.; “Compendium of SEBI- Capital Issues & Listing“
 Ahmed, Salma; 2005, “Reviving the Role of Regulators in Bangladesh Capital
Market”; Pakistan Journal of Social Sciences 3(4)
 Hasan, M. Kabir; Islam, Anisul. M and Bashed, SayedAbul; “Market Efficiency,
Time-Varying Volatility and Equity Returns in Bangladesh Stock Market”; fourthdraft.

IPO PROCESS IN BANGLADESH

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