This term paper gives us a practical experience while passing through the theoreticalunderstanding. The report is the result of our understanding about what are IPO and IPO listingprocedure in Bangladesh. In the introduction, we have briefly discussed about IPO. What it is. In the next we have alsoexplained the methodology regarding this report. Secondary data and information have been usedin preparing this report. Then comes the Analysis part, where we have explained the listingprocedure.
We have divide listing procedure in two Parts according to their behavior, one iswork before Consent and another in work after consent. In the whole listing procedure, the worksare separable like work before IPO consent and work after IPO consent. Like all study, this report has also certain limitations which were in some cases unavoidable. Inthe end we have concluded with a short discussion of overall analysis. Table of Content ConteNT page no. Introduction 4 Methodology of the Study 4 Analysis 5 Conclusion 9 Bibliography 10 INTRODUCTION
Initial public offering (IPO), also referred to simply as a “public offering” or “flotation,” is whena company issues common stock or shares to the public for the first time. They are often issuedby smaller, younger companies seeking capital to expand, but can also be done by large privatelyowned companies looking to become publicly traded. In an IPO the issuer may obtain theassistance 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 individualinvestor, it is tough to predict what the stock or shares will do on its initial day of trading and inthe near future since there is often little historical data with which to analyze the company. Forminimize the risk and attract more investor to the market The IPO has three part as mention inthe following diagram. 10% Shares are restricted for mutual fund; another 10% shares arerestricted for Non Residence Bangladeshi (NRB); and rest of the 80% shares are allocated for thegeneral public. Matholodogy of the study We have used only secondary data source to conduct the study.
The sources of secondary dataare:Secondary information was collected from different web site related to IPO listingprocedure in Bangladesh. We have collected much of the information through the internetand those are mentioned in the bibliography page. IntroductionMethodology Of The Study An initial public offering or IPO is a mechanism for companies to make available for the firsttime shares of their stock. Its purpose is to either raise capital for a new company or to fulfill adesire by an existing company to make their shares available to the public.
Whether it is a new orexisting company, the IPO process follows a fairly straight forward path with precise steps alongthe way. There are some instructions you have to follow to get consent from Securities ExchangeCommission. These instructions are mandatory for investors. Through this process Investor hasto organize all the relevant information. We have divide listing procedure in two Parts accordingto their behavior, one is work before Consent and another in work after consent. In the wholelisting procedure, the works are separable like work before IPO consent and work after IPOconsent.
Works before Obtaining the Consent from Securities Exchange Commission 1)Selection of Advisors: Before applying for consent every company suppose to havesection of legal advisor. Legal Adviser is responsible for Security of internal information. Local Organization usually appoints only Local Advisor and multinational organizationsupposed to have two legal advisers both Local & Foreign. 2)Completion of Valuation and restructuring: Before getting consent Organization willhave to complete their total asset Valuation.
Another important process is changingorganization ’s employee management and also restructuring and obtaining Reportsthereon. Listed Organization’s all top level employee usually has to follow by theAuditor. 3)Selection of Bankers to the Issue: Bankers Letter confirming opening of separate accountfor IPO and accepting their appointment as such Rule -18 of Public Issue Rules 2006. Bankers to the issue will be the important stake holder and they will be responsible fordeposit and withdraw money of investors. )Selection of underwriters: Selection of underwriters & completing underwritingagreement is another essential process of IPO listing procedure. Underwriters are liablefor 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 CapitalMarket History, It never happens besides applications are over subscribe more than 10times of offer. 5)Collection of NOC from Lenders: Collection of No Objection Certificates (NOC) fromLenders is a mandatory to get IPO approval.
Lender should have to issue a letter that if the Company change their existing capital structure then they will not have any objection. If the company have loan from several banks, then it is necessary to collect NOC from allthe lenders. 6)Audit of Accounts: Organization supposed to have Audit of their accounts by authorizedAuditor duly signed on each page, by the issuer’s chief executive officer/managingdirector, chief financial officer and issue manager according to the Rule -3 of PublicIssue Rules 2006.
The audited account shall not be older than 120 days of the end of theperiod for which the Financial Statement is prepared. 10 copies of Financial Statementhave submitted to SEC, one copy each to DSE and CSE. 7)Credit Rating Report: Generally it takes at least two months to complete the CreditRating after the Annual Audit is completed and credit report is mandatory for IPO listingprocess. Rule 18 (21) of the Public Issue Rules 2006 says that the application for consentshall be accompanied by some exhibits including Credit Rating Report.
No issue of shares at a premium or issue of right shares shall be made by a public company unless theissue is rated by a credit rating company and declaration about such rating is given in theprospectus or right offer document (Sec. 3 of Credit Rating Companies Rule 1996). 8)Agreement with CDBL: Before submission of Application to SEC, it is mandatory tocomplete agreement with Central Depository Bangladesh Limited (CDBL). CDBLmaintain online transaction of securities by taking some fees and they listed all theinvestor in Stock Market.
At present there are more than 1600000(sixteen lac investors)in Bangladesh Capital Market. After completion of agreement now company will have totake decision on depositing sponsors shares during Lock-in-Period with Custodial Bank or with CDBL. 9)Approval from Sponsors: At this point of IPO process now it is necessary to takeapproval from the sponsor and documentation the process, undertaking and informationfrom Sponsors/ Directors, Declarations, Due Diligence etc. 10)Refund warrant guarantee: Company supposed to have opened a separate Bank Accountfor refund warrant purpose.
It also called Mother Accounts for Refund Warrant. Throughthis account Company has to refund warrant money to the investor, who will not get theshare. 11)Draft Prospectus: Before applying for IPO Company will have to drafting the abridgeversion of prospectus and dealing with Printers on printing of Prospectus, Forms, RefundWarrants, Letter of Allotment etc. 12)Application Submission: Application has to submit to SEC for consent to Issue withapproved Prospectus and deposit the Govt. Fees of BDT 10,000. If the application isincomplete the SEC shall inform the applicant within 28 ays of receipt of applicationand if the issuer fails to remove incompleteness within 30 days of communication, it shallfile fresh application. (Rule -17 of Public Issue Rules 2006) 13)Consent from SEC: if the application and information, documents are provided by theapplicant are reliable then SEC shall issue letter of Consent within 60 days of receipt of complete application. (Rule -17(4) of Public Issue Rules 2006). If the applicationsubmitted by the applicant is fresh and correct then usually it takes 45days to get IPOconsent. Works After Obtaining the Consent from Securities Exchange Commission )Submission of prospectus: After getting approval from SEC the first step is to submit theabridged version of prospectus in SEC for approval, usually before 10-15 days prior toopening of subscription. And also have to submit signed copy of the Prospectus withRegistrar of Joint Stock Company (RJSC) on or before the date of publication of prospectus in newspapers. ( Section 138 of Companies Act 1994) 2)Announcement for the investor: Company will have to Publish of abridged version of prospectus in 4 newspapers (2 English + 2 Bengali) within 3 working days of theissuance of Consent Letter (Rule 5(1) of Public Issue Rules 2006).
A paper clipping of published Abridged Version of Prospectus has to submit to SEC within 24 hours of publication in newspapers. Issuer Company will have to submit a diskette containing thetext of vetted prospectus to SEC, DSE, CSE and Issue Manager and will have to post the full prospectus vetted by SEC in Websites of Issuer, SEC, DSE, CSE & Issue Managerwithin 3 working days of the issuance of Consent Letter (Rule 6(2) of Public Issue Rules2006). )Provide full prospectus: Issuer Company will have to submit 40 copies of printedprospectus to SEC and also submit printed copies of abridged version Prospectus andapplication forms to Bangladesh Embassies by EMS of postal departments within 5working days from the date of publication of abridged version of prospectus innewspapers. 4)Application for listing: At this point Applicant should apply to all Stock Exchanges inBangladesh and submit the vetted prospectus to the Stock Exchanges within 7 workingdays from the date of issuance of the Consent Letter (Rule 17 of the Public Issue Rules2006). )Subscription period: Subscription List shall be opened and sale of securities commenceafter 25 days of publication of Abridged Version of Prospectus. (Rule – 5 of Public IssueRules 2006) Subscription List shall be closed after remain open for 5 consecutivebanking days. By NRB be made to the Issuer Company within the closing date so as toreach the Company by the closing date plus 9 days. 6)Transaction rate: To apply spot buying rate (TT Clean) in US $ and UK pound and Euro of Sonali Bank for subscription of NRB? . Spot buying rate to be collected from SonaliBank on the date of opening of subscription. 7)In case of under subscription: In case of under subscription, Issuer shall notify theunderwriter to take up underwritten shares. The time limitation is within 10 days of closeof subscription date. Full payment is to be made by the underwriter of underwrittenamount within 15 days of Issuers notice. )Application to Stock Exchanges for Listing: For application for Listing issuer has tosubmit it to SEC attested copies of applications filed with Stock Exchanges within 7working days of issuance of consent letter (Application shall be made by the Company atleast 10 days prior to issue of first Prospectus (Regulation 3 (2) of DSE ListingRegulations). 9)Approval of listing: Granting of listing applications by DSE and CSE for issuing theshare.
The Exchange shall decide the question of granting permission within a maximum period of 6 weeks from closure of subscription lists. (Regulation 3(3) of DSE ListingRegulations) CONCLUTION The first thing a company must do before issuing stock is file a registration with the Securitiesand Exchange Commission (SEC. ) Since the SEC has the power of nullifying any attempt to gopublicAfter (and sometimes before) the registration statement is finished, companies engage theservices of one or more investment bankers.
The role of any investment banker(s) is mostlytwofold. First, it is to distribute the company’s prospectus to prospective buyers of the stock. The second function of an investment banker or underwriter is to buy the company’s shares andresell them to the public. After SEC approval and usually a day or so before the actual public offering, the company andthe investment banker agree on a share price and the number of shares to be sold. The offering iscomplete when the company receives the money and delivers the shares to the underwriter.
Underwriters do extensive research before committing to buy a company’s securities. They takeon a calculated risk, essentially betting that the price per share they pay out to a company will beless than what the market is willing to pay for it. Opportunities for huge profits -and losses- existin this environment. Bibliography 1. Working report on IPO consent and listing procedure in Bangladesh, seehttp://www. 2dix. com/document-pdf/ipo-project-report-pdf. php accessed 9th December 2011 2.
Process of listing with DSE, seehttp://www. bdtradeinfo. com/business/listing_dse. asp accessed 9th December 2011 3. Ipo Process In Bangladesh, seehttp://www. oppapers. com/essays/Ipo-Process-In-Bangladesh/591709 accessed 9th December 2011 4. Going Public Experts, seehttp://www. goingpublicexperts. com/? gclid=CJfv0LOyg60CFY4a6wodd1xFTA access ed 9thDecember 2011 5. “IPO consent and listing procedure in Bangladesh” see http://www. sb. iub. edu. bd/intern_report_asaduz_zaman. pdf . accessed 9th December