GP breaks thru’ IPO hurdle

Grameenphone, the leading mobile phone operator of the country, yesterday received a go ahead from the stock market regulator to raise Tk 486.08 crore through an initial public offering (IPO), the largest of its kind in the history of Bangladesh capital market.
The value of the approved IPO is Tk 37 crore more than the company’s proposed plan for Tk 449 crore.
Each share will be Tk 10 in face value, on top of which a premium of Tk 60 will be added, Anwarul Kabir Bhuiyan, executive director of Securities and Exchange Commission (SEC), told journalists.
The approval came after a long dithering by SEC.
The SEC executive director said the market lot of the shares will be fixed later in consultation with the stock exchange authorities.
“The Grameenphone IPO, which was awaiting the commission’s approval for a long time, will help the capital market expand further on the back of the present bullish trend that creates demand for new securities,” Bhuiyan said.
“With the approval of Grameenphone IPO, other big companies will get a message about the capacity of our market, and will be encouraged to be listed on the stock exchange,” he said hoping that other telecom companies will also follow suit.
SEC also approved increasing the company’s pre-IPO size to Tk 486.07 crore from Tk 420 crore, each of which is priced at Tk 10 in face value, with an additional Tk 64 in premium.
In December last year Grameenphone’s Tk 420 crore pre-IPO was settled with a huge response from the local market.
With the increase in sizes of IPO and pre-IPO representing 10 percent of its paid up capital, Grameenphone will be the first telecom company to enjoy a corporate tax cut of 10 percentage points.
The government in the new budget announced that mobile phone operators may enjoy 35 percent corporate tax instead of the current 45 percent if they are listed with the stock exchange as publicly traded companies, with a caveat that the operators must float 10 percent of the paid up capital on the share market, of which pre-IPO cannot be more than a half.
“We are very pleased to have received the official consent from the SEC today and look forward to an expeditious launching of the public offer and successful listing of our shares in the country’s bourses,” Grameenphone Chief Executive Officer Oddvar Hesjedal, said in a written statement yesterday.
“We are ready and will be following a fast process for fulfilling certain necessary conditions and formalities,” he added.
SEC asked Grameenphone to submit its audited financial report as of December 31, 2008 within July 31 this year.
As many as 6.94 crore shares will be floated through Grameenphone’s IPO, to realise Tk 486.07 crore from the capital market.
The price of each share has been increased to Tk 10 from the company’s proposed price of Tk 1 following demands from market stakeholders.
Dhaka Stock Exchange (DSE) in March this year decided not to list securities with face value of Tk 1, and urged Grameenphone to increase its share price to Tk 10.
In July 2008, Grameenphone worth $3.2 billion back then, finalised its plan to raise $300 million or Tk 2,058 crore from the capital market, $150 million of which would come from the stock market, while the remaining would be raised through private placements or pre-IPO.
Later in October same year the company said it might cut its planned IPO to $125 million — $65 million of which would come from the stock market, and the remaining $60 million through private placements.
Since then the company halved its IPO package, as foreign institutional investors showed the least interest due to the ongoing global economic slowdown.
Grameenphone submitted its final prospectus in January this year. Cititgroup Global Markets Bangladesh Private Limited is the issue manager of the IPO.
Saiful Islam, managing director of investment bank Equity Partners Limited, said an issue like Grameenphone was urgently needed at the moment when the market is bullish and investors are looking for new quality shares.
“It will also help boost investors’ confidence in the market, who have been waiting for Grameenphone shares for a long time,” he added.
The Grameenphone IPO will be a catalyst for many big national and international companies to come in and get listed with Bangladesh capital market, said Islam, also the vice-president of DSE.
He said general investors have also been waiting eagerly for the Grameenphone issue.
Echoing him, Salahuddin Ahmed Khan, professor of finance at Dhaka University, said it is a great achievement.
“It will encourage other big and multinational companies to be listed with our stock exchanges,” he said.
Norway’s telecom giant Telenor owns 62 percent of Grameenphone (GP), which was launched in 1997, while the remaining 38 percent is held by local Grameen Telecom. The share offloading will be proportionately spread between the two shareholders.
GP now enjoys a healthy balance sheet. Its net profit jumped by 68 percent to Tk 320 crore by the end of 2008, compared to Tk 130 crore of the year before.
GP is Bangladesh’s market leader among six mobile operators having 21.05 million subscribers, followed by Banglalink’s 10.95 million, and AKTEL’s 8.84 million as of May 2009.

Courtesy of The Daily Star