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DSE fails to sustain pressure of seven new IPOs

M SHAMSUR RAHMAN and Nazratun Nayeem Monalisa
As many as seven new companies are making initial public offerings (IPOs) in quick succession with a hope to raise Tk 138 crore. But analysts expressed doubts whether the market can absorb the pressure of so many new issues.
All the IPOs were released in the last week of June. These companies will raise Tk 138 crore in a span of just four months from July to October this year.
Prior to allowing the seven companies, the Securities and Exchange Commission (SEC) allowed only four companies during the past six months (January-June) to raise around Tk 57.5 crore which includes a mutual fund.
In just one week, when the market was showing some signs of recovery in response to the budget incentives, the SEC decided to release the IPOs which many fear is now pulling the stock market down as the investors are cashing into invest in the primary market.
A top DSE councillor said the IPOs should be released carefully in phases to make sure that the market is not disturbed. "The
release of so many IPOs at a time will disturb the ailing secondary market," he said.
The new companies which had been okayed in the last week of June are Jago Corporation Ltd, Agni Systems Ltd, First Lease International Ltd, Standard Bank Ltd, One Bank Ltd, Bank Asia Ltd and Mercantile Bank Ltd.
Market operators interpret the SEC action to be an act to show off its performance by recording better figures on book for the outgoing fiscal year.
The regulators however defend themselves saying that they equally treat all the IPOs. "It's not up to us to decide when the companies will come," says a senior SEC official.
He said balance sheets of most of the companies were drawn on December 31 last year and according to Companies Act the accounts remain valid for 180 days.
"If these were not allowed to come by June they would have had to apply again with new audited accounts," the official said.
Another stock market analyst said the reaction in the secondary market would be negligible since most of the good IPOs have been witnessing oversubscription.
"Besides, in primary market fresh funds find their way and the market also sees entry of a huge black money," he said anonymously.
Meanwhile, turnover on the DSE declined to Tk 4.59 crore on July 7 from Tk 28.09 crore on June 30, the last day of FY 2002-03.
General price index on the DSE started sliding down from 830.46 points on June 30 to 825.55 points yesterday.
In the previous year, the DSE price index started gaining with the start of the fiscal year. The general index gained a total of 20.71 points to 813.27 points on July 8, 2002 from 792.56 points on June 30, 2002.
Market analysts say the market did not witness a sluggish trend last year since there were only four IPOs, of those one came in July, two in October and one in November.
The total IPO market in the last six months was only Tk 55 crore which was evenly spread in the last half of the year.
However, in 2001 five new companies made their debut inviting public subscriptions, two were in the month of July, two in October and one in November. The total size of the IPO was Tk 53 crore.