Trading on the exchanges' SME board is getting momentum gradually following the rise in the number of listed companies and increased participations from qualified investors (QIs).
Trading commenced on the SME board of Dhaka Stock Exchange (DSE) on September 30, 2021 and on the day the board saw a turnover of Tk 2520 only.
Later, the DSE's SME board featured a daily average turnover of Tk 3.42 million in October, Tk 1.62 million in November and Tk 1.89 million in December, 2021.
The SME board of the premier bourse posted a daily average turnover of Tk 0.72 million in January, Tk 0.61 million in February and Tk 13.93 million in March, 2022.
Presently, there are nine small cap companies listed on the SME board of the premier bourse.
The companies are: Bengal Biscuits, Mostafa Metal Industries, Apex Weaving and Finishing Mills, Mamun Agro Products, Oryza Agro Industries, Master feed Agrotec, Nialco Alloys, Krishibid Feed, and Wonderland Toys.
Small-cap companies raise capital through SME board floating qualified investor offer (QIO) and only the QIs are allowed to take part in QIO and trading of such companies.
The Bangladesh Securities and Exchange Commission (BSEC) recently has approved the QIO of Achia Sea Foods and Star Adhesive and these two companies are awaiting the listing with the SME board.
The BSEC officials said the QIO of two companies are in process and the BSEC exempted three companies from a requirement of paid-up capital to facilitate the submission of their QIO.
Mohammad Rezaul Karim, a BSEC executive director, said investors' increased participation indicates that the SME board is getting popularity gradually.
"Some nine companies have talked to us about submission of their QIO based on financial statements for the year ended on December, 2021. Some companies of the OTC market are also likely to be shifted to the SME platform," said Mr. Karim, also a BSEC spokesperson.
He said the securities regulator has a target of ensuring the listing of 30 companies within 2022.
"The momentum of the SME board will be visible significantly when a good number of companies will be listed with the SME board," Mr. Karim added.
Companies are allowed to raise capital through the SME board under both fixed price and book building method.
Under the fixed price method, a company's post-issue paid-up capital shall be between Tk 50 million and Tk 300 million.
And under the book building method, the post-issue paid-up capital of a company will be ranging Tk 30 million to Tk 100 million.
The BSEC officials said three companies having paid-up capital beyond the stipulated range have showed interest to raise capital through the SME board.
"The BSEC has exempted those three companies from a clause regarding minimum pre-issue to facilitate their submission of QIO," said the BSEC official.
M. Shaifur Rahman Mazumdar, chief operating officer at DSE, said investors' participation increased in the SME board as the securities regulator eased the criteria of QIs to take part in transactions of companies listed with SME board.
Any investor maintaining a minimum investment of Tk 2.0 million in the listed securities at market value is considered as QIs for trading at secondary market of SME.
Previously, a QI had to maintain a minimum investment of Tk 5.0 million in the listed securities at market value.
The QIs are eligible for the primary market of the SME board include market makers, issuer of listed securities, merchant bankers and portfolio managers, asset management companies, mutual funds and collective investment scheme (CIS), stock dealers, banks, financial institutions, insurance companies, alternative investment fund managers, and alternative investment funds.
Foreign investors having account with any Securities Custodian registered with the Commission, recognized provident funds, approved pension and gratuity funds are also eligible for the primary market of the SME board.
Besides, the resident or non-resident Bangladeshi individuals having minimum net worth of Tk 10 million are eligible for the primary market of the SME board.
All of these investors are also eligible to take part in transactions of the secondary market of the SME board.
