The debut trading of Global Islami Bank failed to draw in investors in an already depressed capital market, sending the message yet again that any newcomer will bear the shadow of pessimism rooted in there for so long.
As soon as the market opened on Wednesday, the stock fell to hit the lower limit of price depreciation, losing 10 per cent of its face value, to close at Tk 9.
A total of 23.53 million shares of the private lender changed hands, generating a turnover of Tk 212.57 million on the Dhaka Stock Exchange.
Analysts attributed the dismal turnout to the weak market and the overall poor performance of the banking sector.
Chartered Life Insurance, which debuted last month, saw its share price jump 10 per cent on the opening day. Navana Pharma's share trading stopped in the debut trading last month after the stock hit the upper ceiling of price movement.
Global Islami Bank raised Tk 4.25 billion from the capital market under the fixed price method, by issuing 450 million shares through initial public offering.
It reported a 29 per cent year-on-year drop in profit for the July-September quarter of this year just before launching the IPO.
The bank's income for the nine months through September also fell 18 per cent compared to the same period a year ago.
The feeble financial health and the huge amount of IPO shares were why the debut played out disappointingly, analysts said.
"Negative sentiment is now hanging over the market, leaving an impact on the debut trading," said Md Sajedul Islam, senior vice president of the DSE Brokers Association of Bangladesh.
The persistent market volatility, poor performance of the banking sector along with economic uncertainties influenced investors' sentiment, said Mr Islam, also the managing director of Shyamol Equity Management.
The banking sector has long been facing a stressful situation due to a liquidity crunch and high non-performing loans, making investors lose interest in the bank stocks.
Currently, seven banks are trading below their face value of Tk 10, out of 34 banks listed with the capital market.
ICB Islamic Bank's share closed at Tk 5.40, National Bank at Tk 8.30, Standard Bank at Tk 8.80, First Security Islami Bank at Tk 9.80, Union Bank at Tk 9.30 and AB Bank at Tk 9.90 on Wednesday.
A merchant banker said his organisation had not received many applications for the IPO, a factor that indicates what drove down stakes of individual investors and non-resident Bangladeshis.
Of the total shares, 25 per cent was reserved for NRBs, with the remaining 75 per cent divided into two segments -- for individual investors and institutions.
But the stakes for general investors and NRBs were lower than the targets set.
Later, the shares left were redistributed among institutions with the approval of the securities regulator, leading to oversubscription of IPO by 1.10 times.
As the investors got a huge amount of shares, they sought to avoid risks by dumping their holdings at the opening, said the merchant banker preferring not to be named.
He said shares of many banks with good financial health are available in the market at cheaper prices, discouraging investors to go for a new generation bank.
However, an issue manager said, "It [debut trading] was a little bit disappointing, but this is just the beginning. It is a kind of bank with a lot of long-term growth opportunities."
Global Islami Bank (GIB) is the 34th listed bank on the DSE. The banking sector accounted for almost 15 per cent of the total market capitalisation.
The GIB's IPO was the second largest in the sector after Union Bank that had raised Tk 4.28 billion last year.
GIB's pre-IPO earnings per share was Tk 1.57 while post-IPO EPS Tk 0.86. The net asset value (NAV) per share was Tk 16.61 at the end of September.
The private sector lender will utilize the IPO proceeds for investing in small and medium enterprises (SMEs) and in listed companies and for buying government securities.
LankaBangla Investments and Prime Bank Investment are jointly working as the issue manager for the IPO.
Global Islami Bank, formerly known as NRB Global Bank, is a fully-fledged Islamic Shariah-based commercial bank that started operation in October 2013.
