BSEC step to create a dynamic board for SMEs

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Equity investors do not know enough about the SME board while its strict requirements led to low attendance, so the board was almost inactive, said Khairul Bashar Abu Taher Mohammed, CEO of MTB Capital.

The DSE-SME, a small capitalization board, was rolled out on April 30, 2019, so that small and medium-sized enterprises (SMEs) with paid-up capital between Tk 5 crore and Tk 30 crore can benefit from a financing on the stock market. .

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In order to make the board dynamic and better benefit the industry, the Bangladesh Securities and Exchange Commission (BSEC) has relaxed the attendance requirement.

On Thursday, the stock market regulator reduced the minimum investment requirement in listed shares to Tk 20 lakh from the previous Tk 50 lakh.

Additionally, investors would no longer need to register to trade on the board.

Instead, Central Depository Bangladesh Ltd will prepare the list of eligible investors quarterly and provide detailed information based on the minimum investment requirement. Exchanges also won’t charge a fee for listing, according to the BSEC order.

Five SMEs have so far raised funds by signing up for the new board, which has few buyers and sellers, meaning the companies are far from meeting their valuation expectations , Bashar said.

“If the issuer sees that their company’s shares are not trading and the prices are not accumulating, it could be demoralizing for them and for others.”

“Now registration will be completed automatically if an investor has a minimum of Tk 20 lakh investment, which means the process has become much easier.”

Eligible investors will receive a text message letting them know they can trade on the new board, said Bashar, who is also a former general secretary of the Bangladesh Merchant Bankers Association.

Welcoming the change, Bashar said it was a positive move which hopefully will help investor participation and trading volume to increase, prices should rise and encourage new companies to sign up. .

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

Responding to a question, Bashar said general investors were kept out of the market due to the fact that new businesses and companies with negative cash flows were allowed to raise funds from the new board.

“Another reason is that these companies are not required to submit quarterly reports, for which it is difficult for general investors to analyze their potential.”

“We were in a situation of a double-edged sword as this could be a risky investment for generalist investors who have little appetite for risk while on the other hand the market had gone dormant in the absence of ‘investors,’ he said. .

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

“As the SME sector is the backbone of Bangladesh’s economy, companies should be allowed to avail funds from the stock market.”

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