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Following the letter, Best Holdings Limited, the company that operates the five-star Lo Meridian Hotel in Dhaka, sought to increase Tk 263 crore through direct listing.
The Dhaka Stock Exchange (DSE) board meeting was scheduled to discuss the request on Thursday, but the Bangladesh Securities and Exchange Commission (BSEC), the capital market regulator, sought clarification on the matter. raising some legal questions about direct listing restrictions and eligibility for best shares.
Furthermore, BSEC Deputy Director Mohammad Nazrul Islam wrote to DSE to instruct it to suspend all listing activities of Best Holdings until responses to these questions are received.
The controversy arose when a report on the subject was published in the media. In this context, on Thursday a letter was sent from the office of the Minister of Finance, AHM Mustafa Kamal, asking him to suspend the validity of the letter of recommendation of September 6.
Ferdous Alam, private secretary to the finance minister, confirmed to bdnews24.com that the letter had been sent to the governor of the Bank of Bangladesh and chairman of the Bangladesh Securities and Exchange Commission.
In the context of the letter, it was drafted in the context of ‘Listing in the share capital of the company involved in the project in order to generate liquidity and reduce risk in equity exposure adopted by public and private listed banks to finance infrastructure projects’.
The new directive states: “Following the instructions of the Honorable Minister of Finance, you will be informed that no further action will be taken with respect to the letter dated 08/09/2020 unless additional instructions are given.”
On behalf of the Minister of Finance, the letter sent to BSEC and Bangladesh Bank at their signature last September recommended making the direct listing rules more flexible in the case of infrastructure projects or companies involved in the project in order to ensure a low price on the capital market. soon as possible. In addition, the rules for determining the price of the shares must also grant a discount.
In addition to hospitality, Best Holdings, which is engaged in the agriculture and construction business, applied to the Dhaka Stock Exchange and Securities and Exchange Commission on November 12 for “special permission” to go directly public.
In this process, the application mentioned the plan to raise 238 crore 8 lakh 25 thousand 7 rupees from the capital market.
Best Holdings’ issuance managers are Chowdhury Nafiz Sarafat’s Race Portfolio and Issue Management company and the government-owned ICB Capital Management Limited.
The capital market regulator was activated when the DSE board took the initiative to discuss the application of Best Holdings.
A letter signed Tuesday by BSEC Deputy Director Mohammad Nazrul Islam requested clarification from DSE on a number of legal issues, as well as the suspension of Best Holdings’ listing.
Direct listing is the method by which a company can be listed directly on the capital market without increasing its paid-up capital and without issuing new shares. Under this rule, the company has the opportunity to sell its shares to investors in the capital market.
According to a directive issued by BSEC in 2016, the country’s two stock exchanges will not allow any private company to enter the capital market through direct listing. Only government companies or state controlled entities will be eligible for direct enrollment.
Best Holdings requested a direct listing, despite the fact that 70.4% of its property is private and privately owned.
Sonali, Janata, Agrani and Rupali Bank are the four state banks with a 29.6 percent stake in Best Holdings. Using this as an argument, they demanded that special permission for direct enrollment.
The Best Holdings documents show that 52.01% of them are owned by individuals and some limited companies. The remaining 48.99 percent of the shares are owned by underwriter shareholders.
Of this, 29.56 percent is owned by four state banks. Of this, Sonali and Janata Bank have 7.63 percent each. Agrani Bank owns 6.72 percent and Rupali Bank owns 5.3 percent.
To allow Best Holdings to be listed on the direct listing system, the regulator has asked DSE to consider whether the investment of four state-owned banks as placement shareholders in the company is considered “government-owned.”
According to the BSEC letter, Best Holdings raised a total of Tk 72.2 crore by selling placement shares from August 2019 to June 2020.
But according to the Direct Listing Regulation, a business may not be eligible for direct registration if it has raised funds or issued securities in the last two years.
The letter from the Securities and Exchange Commission also sought an explanation of how the Dhaka Stock Exchange is considering the disqualification issue.
The BSEC said that the value of the net current assets of Best Holdings from August 2017 to 2019 was also negative, which is contrary to the rules related to direct listing.
Furthermore, Best Holdings wants to release 43.5 million shares in the capital market, which is only 5 percent of its 70 million total shares. However, in order to be listed directly on the stock exchange, at least 25 percent of the shares must be released in accordance with the law. The BSEC also requested an explanation from the DSE authorities on these issues.
The letter sent to the Minister of Finance on the basis of which Best Holdings claims the installation, how the DSE verified the authenticity of the letter, the letter sent to the Dhaka Stock Exchange, the regulatory body is also asked to explain.
There is concern among capital market stakeholders about how Best Holdings is trying to circumvent the direct listing of private sector companies.
One of them told bdnews24.com on condition of anonymity: “Initiatives have been taken to directly include the company. This is a clear violation of the law.”
“It’s going to be a big scam,” a former DSE director told bdnews24.com on condition of anonymity. The regulatory body must take action against him now. “
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