The insurance firms sought exemptions from capital requirements in the IPO process and regulators expressed their openness to it
Non-listed insurance companies have been instructed to submit their planned roadmap to the stock market within November 15 this year.
Following the finance minister's orders to initiate listing efforts within this year, the Insurance Development Authority (IDRA) had a meeting with representatives of 27 non-listed insurance firms on Sunday at its office.
The capital market regulator Bangladesh Securities and Exchange Commission (BSEC) was represented by one of its directors.
At the meeting, the companies explained the potential barriers to getting listed within such a short notice.
Both the insurance and securities regulators assured them of special consideration, which will lead to relaxing the existing preconditions for an initial public offering (IPO).
Earlier in mid-September, Finance Minister AHM Mustafa Kamal had told all the non-listed insurance companies to initiate IPO attempts within three months.
Almost half of the companies, so far, have already appointed preferred investment bankers as issue managers, who will help them to enter the stock market, said Gokul Chand Das, a member and the spokesperson of the insurance regulator.
In the meeting the insurers sought exemptions from capital requirements in the IPO process and both the regulators expressed their openness to it, if needed and provided that there is an instruction from the finance ministry.
The capital barrier
According to the amended public issue rules formulated by the BSEC, a company can apply for an IPO under the fixed price method if it had posted a net profit after tax in the immediate past year, and it has no accumulated loss.
A company must apply to accumulate a capital of Tk30 crore at least and the post-IPO paid-up capital must not be less than Tk50 crore.
On the other hand, the insurance act of the country requires insurance companies to go public through issuing primary shares – not exceeding two-thirds of what the entrepreneurs hold.
If there is no special exemption, insurance companies – under the new public issue rules – must increase their paid-up capital to Tk45 crore at least, and then they have to collect at least Tk30 crore from the stock market.
To comply with both the regulations, the post-IPO paid-up capital of insurance companies must not be less than Tk75 crore.
If any insurance company intend to issue primary shares at a premium, the to-do list will be tougher because those IPOs need to be bigger in terms of size," according to the investment bankers.
To list insurance companies with the stock market promptly, exemption from any of the regulations is necessary now.
The 27 companies
Among the 27 companies instructed for listing by the IDRA, 18 are life insurers and nine are non-life insurance companies.
Of the life insurers, Sonali Life Insurance company, and from the non-life sector, Express Insurance, Crystal General Insurance and Desh General Insurance, have already filed for IPO.
Bangladesh Co-operative Insurance, as a local co-operative non-life entity, and Metlife Insurance, as a branch of a foreign company, are excluded from the list of the 27 companies.
State owned non-life reinsurer Shadharan Bima Corporation and life insurer Jiban Bima Corporation are also excluded, as these two are run under specific acts or ordinances.
Companies with gross failure or non-compliance will not be allowed in the main board of the exchanges
"We have told all the 27 companies to submit their roadmap about how they are planning to enter the stock market," said Gokul Chand Das.
He added that they will submit their plans within November 15, 2019 and the regulators will further discuss issues that may emerge as barriers in listing. The government wants them to start the process for IPO before the year ends.
"But there are a few companies with extreme business failure or gross non compliances to the insurance regulations. We will push them to get corrected soon," he added.
Some companies are still extremely undercapitalised and they should not be allowed in the main trading board of the stock exchanges, until they reach moderate capitalisation.
They may plan for a listing with the newly launched small cap companies' platform of the local bourses, a BSEC official suggested while speaking to The Business Standard.