Bangladesh Securities and Exchange Commission (Public Offer of Equity Securities) Rules, 2025

Preliminary & Scope

• Title: The Bangladesh Securities and Exchange Commission (Public Offer of Equity Securities) Rules, 2025.
• Effectiveness: They take effect immediately, repealing the previous Public Issue Rules, 2015.
• Application: These rules apply to any issuance of equity securities through a public offer (IPO or RPO).

Methods of Public Offer

Issuers must use one of two methods to determine the offer price:

1. Fixed Price Method: The issuer fixes the offer price in consultation with the issue manager. This is typically for companies that offer shares at face value or at a lower premium.
2. Book Building Method: The offer price is determined through a bidding process by Eligible Investors (EIs). This creates an “Indicative Price” (via road show) and a final “Cut-off Price” (via bidding).

Eligibility Requirements for Issuers

A company must meet the following criteria to apply for a public offer:

A. General Requirements (For All Issuers)

• Legal Status: Must be a public limited company.
• Capital:
  • Minimum pre-IPO paid-up capital: Tk. 30 Crore.
  • Minimum post-IPO paid-up capital: Tk. 50 Crore.
• Sponsor Holding: Sponsors and directors must collectively hold at least 30% of the post-IPO paid-up capital at all times.
• Profitability: Must have a profitable track record for at least the latest financial year with no accumulated retained loss (exceptions for greenfield/regulated companies).
• Utilization of Funds: Must have utilized at least 90% of proceeds from any previous capital raise.
• Financial Statements: Must be audited and not older than 120 days at the time of application.
• Loan Default: The issuer, its directors, and shareholders holding 5% or more must not be in default on any loan.
• Credit Rating: Must be rated by a credit rating company.
  • Fixed Price (with Premium): At least “Single A” (long-term).
  • Book Building: At least “Single A” (long-term).

B. Specific Requirements: Fixed Price Method

• Capital Cap: Post-IPO paid-up capital generally cannot exceed Tk. 125 Crore.
  • Exception: Regulated companies or greenfield companies can exceed this limit.
• Premium Eligibility: To offer shares at a premium (above face value), the company must:
  • Be in commercial operations for at least three years.
  • Have net profit and positive operating cash flow for the last two years.

C. Specific Requirements: Book Building Method

• Operations: Must be in commercial operation for at least 3 years.
• Profitability: Must have net profit and positive operating cash flow for the last two years.
• Offer Size: Generally, must offer at least 10% of post-IPO capital. If capital/net worth is ≥ Tk. 500 Crore, the offer can be reduced to 5%.

D. Special Category: Green Field Companies

Defined as a company that has not yet commenced commercial production.

• Pricing: Shares must be offered at par or discount only.
• Capital: Post-IPO capital can exceed Tk. 125 Crore.
• Sponsor Contribution: Sponsors, directors, and strategic investors must contribute at least 75% of the post-IPO paid-up capital.
• Strict Lock-in: This 75% capital must be retained until the company reports 2 consecutive years of net profit.
• Experience: Sponsors/Directors must have a successful track record in running similar businesses.

Valuation Guidelines (Annexure C)

Strict rules prevent overvaluation of shares.

• Mandatory Methods: The offer price (or indicative price) must be justified using at least 4 methods:
  1. Absolute Valuation (2 methods): e.g., Discounted Cash Flow (DCF), Dividend Discount Model, Asset-Based.
  2. Relative Valuation (2 methods): e.g., P/E Ratio, P/B Ratio, P/Sales, EV/EBITDA.
• Discount Rate: For DCF, the discount rate must be at least the 10-year Treasury bond yield.
• Growth Rate: Revenue growth projections cannot exceed the average growth rate of the last 5 years (unless capacity expansion is proven).

The Book Building Process

1. Road Show:
   • The issuer presents the company to eligible investors (EIs).
   • The indicative price is determined based on valuations submitted by at least 40 EIs (including 10 portfolio managers, 10 stock dealers, and 10 asset managers).
2. Bidding:
   • Price Band: Bidders can bid within 25% above or below the indicative price.
   • Duration: Bidding remains open for 72 hours.
   • Cap: No single bidder can bid for more than 1% of the total EI allocation.
   • Cutoff Price: The price at which the EI quota is fully exhausted.
3. Anti-Cartel Rules: The commission explicitly prohibits collusion (e.g., bid clustering, identical quantities) and imposes penalties, including bans on bidders for 3 IPOs or suspensions of licenses for 5 years.

Distribution of Shares (Quotas)

The allocation of shares differs by method:

Category	The fixed price method	The book-building method
Eligible Investors (EIs)	10%	40%
Mutual Funds	10%	10%
General Investors (Public)	60%	35%
Non-Resident Bangladeshis (NRB)	10%	7%
Employees / HNIs	10% (5% each)	8% (3% Emp, 5% HNI)

  Note: The mutual fund quota will be adjusted to 15% after 5 years.

  Employees: The maximum subscription amount per employee is Tk. 10 lakh.

Lock-In Periods

Shares held by certain shareholders are locked (cannot be sold) for specific periods starting on the first trading day:

1. Sponsors, Directors & >5% Shareholders: 3 Years.
2. Shares Transferred by Sponsors (Pre-IPO): 3 Years.
3. Strategic Investors: 2 years from investment or 1 year from listing (whichever is later).
4. Placement Holders (Others): 1 Year (if allotted within 3 years of IPO approval).
5. Alternative Investment Funds (AIFs) & Foreigners: 1 Year.
6. Eligible Investors (Book Building Only): Staggered Lock-in:
   • 50% of allotted shares: 90 Days
   • 25% of allotted shares: 120 Days
   • 25% of allotted shares: 180 Days

Fees and Expenses

The rules set maximum limits on issue expenses:

• Issue Management Fee:
  • Fixed Price: Max 1% or Tk. 25 Lac (the higher one).
  • Book Building: Max 1% or Tk. 30 Lac (whichever is higher).
• Underwriting Fee: Max 0.5% on the 35% firm commitment amount.
• Registrar Fee: Max 0.3% of the public offer or Tk. 10-15 Lac.
• Application Fee: Tk. 50,000 (non-refundable).

Use of Proceeds

Strict controls on how IPO money is spent:

• Loan Repayment: Up to 30% of IPO proceeds may be used to repay loans.
  • Loans must be non-classified and originally used for projects/BMRE.
• Quarterly Reporting: Utilization reports must be audited and submitted within 10 days of the end of each quarter.

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