Bangladesh Unveils New IPO Rules to Attract Quality Companies to Capital Market
Dhaka, January 4 – The Bangladesh Securities and Exchange Commission (BSEC) has officially published new regulations governing Initial Public Offerings (IPOs), a move anticipated to inject a new wave of quality companies into the nation’s capital market. The revised rules, formally known as the Bangladesh Securities and Exchange Commission (Public Offer of Equity Securities) Rules, 2025, were gazetted on December 30 and have taken immediate effect.
These updated regulations aim to streamline the IPO process while enhancing the integrity and appeal of the stock market. A significant aspect of the reform is the amplified role assigned to stock exchanges in the initial stages of company listings. Under the new framework, stock exchanges will now be responsible for granting preliminary approval to IPO applications. Subsequently, the BSEC will provide the final approval, building upon the recommendations put forth by the exchanges. This collaborative approach is expected to foster greater efficiency and transparency.
Key Provisions of the New IPO Rules:
- Minimum Paid-Up Capital: Companies seeking to list on the stock exchange through an IPO must now possess a minimum paid-up capital of Tk 30 crore. This threshold is designed to ensure that only financially robust entities can access public funding.
- Public Offer Threshold: A minimum of 10 percent of a company’s post-IPO shares must be offered to the capital market. This provision aims to broaden public ownership and encourage wider investor participation.
- Fund Utilisation Timeline: Issuers will be mandated to complete the utilisation of funds raised through their IPOs within a five-year period following the completion of the offering. This measure is intended to prevent the misallocation or hoarding of capital.
The BSEC has expressed considerable optimism regarding the potential impact of these new rules. Abul Kalam, Director and spokesperson for the BSEC, highlighted the challenging nature of revising IPO regulations, describing it as the most demanding task after the reforms implemented for mutual funds and margin rules. “The commission finalised the rules and sent them to the relevant ministry within December,” Kalam stated. “The new IPO rules will benefit the stock market in the long run.”
Addressing Past Challenges in Market Inflows
For over a year prior to the finalisation of these rules, the BSEC had been actively pursuing strategies to attract high-calibre companies to the market. However, these efforts had met with limited success, leading to growing frustration among investors who observed a stagnation in the inflow of quality listings. Despite numerous meetings involving state-owned enterprises and multinational corporations, the capital market had failed to secure any major new entrants.
Investors have voiced their disappointment with the lack of progress. Sajjadul Islam, an investor, remarked, “A single good company can turn the market around. But the commission has failed to bring even one. When companies like Square Pharma, Grameenphone or Robi entered the market, it helped revive investor confidence. Yet even after a year, this commission has not been able to bring any quality company.” Another investor, Abul Hossain, echoed this sentiment, noting that the continued delays were causing many to disengage from the market out of sheer disappointment.
Bureaucratic Hurdles and Investor Confidence
A senior BSEC official, speaking anonymously, attributed the past year’s lack of quality listings to significant bureaucratic complexities. “If these bureaucratic hurdles did not exist, it would have been possible to bring good state-owned companies to the market, even if multinational private companies remained reluctant,” the official explained. The commission had reportedly engaged in year-long efforts to directly list 18 state-owned companies. “Even with direct instructions from the Chief Adviser, these companies could not be listed due to delays and non-cooperation from the concerned ministry secretaries. Despite repeated meetings and requests, the issue was not taken seriously.”
When questioned about the timeline for new company listings under the revised rules, BSEC spokesperson Abul Kalam reiterated the commission’s hope that quality companies would be listed within the current year.
However, some investors have raised concerns about the BSEC’s approach since its inception, alleging that a number of IPO applications already in process were cancelled. This, they claim, has led to a loss of interest among merchant banks, who act as issue managers, in submitting new IPO proposals.
Abul Kalam defended the commission’s stance, stating, “We did not rush to list bad companies. Most of the IPOs approved by the previous commission were of poor-quality companies, which destabilised the market and increased manipulation. Our focus is on eliminating manipulation and ensuring that only good companies are listed.”
The Road Ahead: Elections and Market Governance
Saiful Islam, President of the DSE Brokers Association of Bangladesh (DBA), expressed a cautious outlook, suggesting that the likelihood of IPOs occurring before the national election is low. He emphasized that good companies would only consider listing if robust governance were re-established in the capital market. “Let alone comparing Bangladesh with India, even compared to Pakistan and Sri Lanka, Bangladesh lags far behind in terms of market governance scores. Without addressing these issues, the capital market cannot return to normal,” Saiful asserted.
He further suggested that stability and a potential market turnaround might emerge after the upcoming national election and the formation of a new government, creating an opportune moment for quality companies to enter the market.
Commission sources also revealed that the responsibility for managing IPOs of major companies as an issue manager was exclusively assigned to the state-owned Investment Corporation of Bangladesh (ICB). However, this initiative reportedly failed to yield the desired results. Investigations indicated that ICB, once a profitable entity, is currently grappling with substantial losses, exceeding Tk 1200 crore in the 2024-25 fiscal year. The institution has been relying on loans and has resorted to selling shares to meet its interest obligations.
Despite these challenges, ICB Chairman Professor Abu Ahmed remains optimistic about a potential recovery. “Despite many ups and downs, ICB has survived. In the past, its funds were invested in poor-quality IPOs linked to market manipulation, which caused significant losses,” he acknowledged. “We are hopeful that good companies will be listed in the market soon. Alongside state-owned enterprises, multinational companies will also come to the market, which will change the overall scenario.”
Market analysts concur that while the new IPO rules incorporate stronger safeguards against market manipulation, they may also present certain complexities for listing. Nevertheless, the prevailing sentiment among analysts is that these reforms are poised to deliver long-term benefits to the capital market.
