Commerce on the SME board soars

Some OTC market cos are likely to transfer to the board

Trading on the SME board of the stock exchanges is gradually accelerating following the increase in the number of listed companies and the increase in the holdings of qualified investors (QI).

Trading started at the Dhaka Stock Exchange (DSE) SME Board on September 30, 2021 and the day the board recorded turnover of only Tk 2520.

Later, the DSE SME board presented an average daily turnover of Tk 3.42 million in October, Tk 1.62 million in November and Tk 1.89 million in December 2021.

The First Exchange’s SME board recorded an average daily turnover of Tk 0.72 million in January, Tk 0.61 million in February and Tk 13.93 million in March 2022.

Currently, nine small-cap companies are listed on the First Exchange’s SME Board.

The companies are: Bengal Biscuits, Mostafa Metal Industries, Apex Weaving and Finishing Mills, Mamun Agro Products, Oryza Agro Industries, Master feed Agrotec, Nialco Alloys, Krishibid Feed and Wonderland Toys.

Small cap companies raise capital through the SME Board’s Qualified Investor Floating Offer (QIO) and only IQs are allowed to participate in the QIO and trading of these companies.

The Bangladesh Securities and Exchange Commission (BSEC) recently approved the QIO of Achia Sea Foods and Star Adhesive and these two companies are awaiting registration on the SME board.

BSEC officials said the QIO of two companies is in progress and BSEC has exempted three companies from a paid-up capital requirement to facilitate their QIO submission.

Mohammad Rezaul Karim, Executive Director of BSEC, said the increased participation of investors indicates that the SME board is gradually gaining popularity.

“About nine companies told us about submitting their QIO based on financial statements for the year ending December 2021. Some companies in the OTC market are also likely to be switched to the SME platform,” Mr. Karim, also a spokesperson for the BSEC.

He said the securities regulator aims to have 30 companies listed by 2022.

“The momentum of the SME board will be significantly visible when a good number of companies are listed on the SME board,” Karim added.

Firms are allowed to raise capital through the SME Board under the fixed price method and the order book method.

Under the fixed price method, a company’s paid-up capital after issuance must be between 50 million and 300 million taka.

And according to the book building method, the post-issuance paid-up capital of a company will be between 30 and 100 million Tk.

BSEC officials said three companies with paid-up capital above the stipulated range had expressed interest in raising capital through the SME board.

“BSEC exempted these three companies from a clause regarding minimum pre-issuance to facilitate their QIO submission,” the BSEC official said.

Mr. Shaifur Rahman Mazumdar, Chief Operating Officer at DSE, said investor participation on the SME board has increased as the securities regulator has relaxed the IQ criteria to participate in transactions of companies listed on the board. SME.

Any investor maintaining a minimum investment of Tk 2.0 million in securities quoted at market value is considered a QI for trading in the SME secondary market.

Previously, a QI had to maintain a minimum investment of Tk 5.0 million in securities listed at market value.

SME board primary market eligible IQs include market makers, issuers of listed securities, investment bankers and portfolio managers, asset management firms, mutual funds and investment firms (UCITS), securities brokers, banks, financial institutions, corporate insurance companies, managers of alternative investment funds and alternative investment funds.

Foreign investors with an account with a Commission-registered securities depository, recognized provident funds, approved pension and gratuity funds are also eligible for the SME advisory primary market.

In addition, Bangladeshi resident or non-resident natural persons with a minimum net worth of Tk 10 million are eligible for the primary SME consultancy market.

All of these investors are also eligible to participate in SME advisory secondary market transactions.

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