Thursday 23, March 2023

BSEC step to create vibrant SME board

Stock investors are not adequately aware of the SME board while its stringent requirements led to sparse participation, so the board was almost dormant, said Khairul Bashar Abu Taher Mohammed, CEO of MTB Capital.

The DSE-SME, a small-cap board, was rolled out on April 30, 2019, so that small and medium enterprises (SME) having a paid-up capital between Tk 5 crore and Tk 30 crore could avail financing from the stock market.

To make the board vibrant and come to better benefit the sector, the Bangladesh Securities and Exchange Commission (BSEC) eased the participation requirement.

On Thursday, the stock market regulator reduced the minimum investment requirement in listed stocks for trading on the board to Tk 20 lakh from the previous Tk 50 lakh.

Moreover, investors now would not need to register themselves for trading on the board.

Instead, the Central Depository Bangladesh Ltd on a quarterly basis will prepare the list of eligible investors and provide detailed information based on the minimum investment condition. The stock exchanges also will not impose any charges for getting listed, according to the BSEC order.

Up until now, five SMEs have raised funds by getting listed with the new board, which has few buyers and sellers, meaning that the companies are far from having their valuation expectations fulfilled, said Bashar.

"If the issuer sees that his/her company shares are not being traded and the prices are not building up, it could be demoralising for them and others."

"Now, the registration will be completed automatically if an investor has a minimum of Tk 20 lakh in investment, meaning that the process has become much easier."

Eligible investors will receive an SMS informing them that they can trade on the new board, said Bashar, who is also a former secretary-general of the Bangladesh Merchant Bankers Association.

Welcoming the change, Bashar said it was a positive move that would hopefully help investor participation and trade volume to surge, expected prices to build up and get new companies interested in getting listed.

However, most companies' shares are now rarely traded while the prices at which they are traded are almost the same prices as their face value although they have varying potentials.

Responding to a question, Bashar said general investors were kept away from the market due to greenfield companies and companies with negative cash flows being allowed to raise funds at the new board.

"Another reason is that these companies are not bound to submit quarterly reports, for which it is tough for general investors to analyse their potentials."

"We were in the situation of a double-edged sword because it might be a risky investment for general investors who have a low appetite for taking risks while on the other hand, the market had become dormant in the absence of investors," he said.

However, the SME board should be first kept afloat for the sake of the country's economy and once it is able to stand on its own, the BSEC can rethink the changes, said Bashar.

"As the SME sector is the backbone of Bangladesh's economy, the enterprises should be allowed to avail funds from the stock market." 

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