Demutualisation Scheme
DSE’s EPS only Tk 0.60, members worried over IPO prospect
The low earning per share of Dhaka Stock Exchange of Tk 0.60 as mentioned in the demutualisation scheme has made the members of the bourse worried about the prospects of its initial public offering to be floated in a few years. The bourse has targeted to float its IPO after three years of its demutualisation. ‘We are very much anxious about the future value of the shares of the DSE as its EPS has stood at Tk 0.60 which is very low for a company to get attractive price in an IPO,’ a DSE member told New Age.
He said they were also worried that whether it could be able to increase its earning or not before it applies for an IPO. ‘If it fails to increase its earning before the IPO application, it would not be able to get good premium in IPO nor would it be able to get lucrative share price in the secondary market,’ he said.
If the earning of the bourse remains the same when it will float IPO, the low earning could lead the DSE shares to be traded below ‘A’ category as it will fail to declare dividends above 10 per cent, he said.
The DSE in its scheme which was submitted to the Bangladesh Securities and Exchange Commission on July 29 set Tk 4,200 crore as its value, while the paid-up capital was set at Tk 1,803 crore.
‘Total assets of the bourse have been converted into shares by dividing it by 10 which has resulted in around 180 crore shares of the bourse. That’s the reason for the poor EPS of the DSE,’ a DSE high official told New Age.
He also said that there was no other option in hand to increase the EPS of the bourse as they had done the calculation as per the demutualisation act.
‘It will be tough for the DSE to declare 10 per cent dividend for the shareholders at least for the next two years as per its earning,’ he said.
‘No reserve left from where it would be able to declare any extra dividends,’ the DSE official said.
He said there was a scope of increasing its earning by introducing derivatives and commodity market but it would need fresh investment to build awareness about the products.
Having an internationally renowned strategic partner could ease all the work for the bourse, he said.
The net earning of the DSE was Tk 94.37 crore in the financial year 2011-2012, while it was Tk 175.70 crore in the FY 2010-2011.
‘It is not possible for me to make any comment on the matter until the regulator approves the demutualisation scheme,’ DSE president Ahasanul Islam told New Age.
The DSE board on July 22 approved the bourse’s valuation at around Tk 4,200 crore and each member house was valued at Tk 7.21 crore without premium.
In the demutualisation schemes, the bourses proposed downsizing of their
respective boards to 19 from the existing 25 members.
The bourses proposed that 10 members would come from the independent criteria and nine from the members’ criteria.
According to the Exchanges Demutualisation Act, 2013, which was passed in the parliament on April 29, the stock exchanges are bound to submit their demutualisation schemes to the securities regulator within 90 days of the day when the act comes into effect and the regulator will approve the schemes within the next 60 days.
The demutualisation act also said that the stock exchange members or brokerage houses will hold 40 per cent shares after the demutualisation of a bourse.
The rest 60 per cent will be kept for trading by right entitlement certificate holders, strategic investors and individuals, the act says.
Strategic investors will not be allowed to hold more than 25 per cent shares of a stock exchange, while no individual will hold more than 5 per cent, the act says.
The act has paved the way for separating the bourses’ management from ownership to ensure transparency and accountability in the stock market.
The demutualisation act says independent experts will hold the posts of chairmen of the Dhaka and Chittagong stock exchanges, not the owners-cum-directors of the bourses.
-With New Age input
