Professional Documents
Culture Documents
An Internship Report Presented in Partial Fulfilment of the Requirements for the Degree Bachelor of Business Administration (BBA)
Working report on IPO consent and listing procedure in Bangladesh, Capital Market, Finance Division, Grameenphone, Ltd.
Approved By:
Letter of Transmittal
Dear Sir, I have prepared my internship working report on IPO consent and listing procedure in Bangladesh, based on working experience of Capital Market division, Finance Department, Grameenphone Ltd, which I am submitting along with this letter. It was an energizing experience throughout the semester and preparing this report further enhanced my insight about how corporate level activities are being done and experience the real life situations which I have learnt throughout my internship (BBA-499A) in Grameenphone Ltd. This report will also reflect my working experience as an intern in Finance Division.
As you will note, this report is an accumulation of data regarding the Capital Market Project by Finance department of Grameen Phone Limited. All the data was collected from interviewing some relevant outside people and finance department employees. I hope that this report fulfils your requirements and your feedback will help me in my entire life. Thank you for your kind consideration and guidance.
Sincerely,
Acknowledgement
First of all, I have to thank Mr. Rushdi Md. Rezaur Razzaque, for his insisting on the brevity of the report. He helped me determine the objective of the report and guided me through to get to the end. The format prescribed by him is pretty user friendly. I would like to say thanks to my honourable supervisor at Grameen Phone, A.K.M. Anwarul Kabir (AGM, Capital market, Finance) for helping me to choose an effective topic for my internship report and giving me the constant support to accomplish my internship project at the right time in the right manner. I really should thank the employees of Capital Market Division at Grameen Phone, whom I show my gratitude for all the necessary support. Most of them have been very open and friendly with me and provided me with the answers I needed from them.
EXECUTIVE SUMMARY
The internship program is designed to bridge the gulf between the theoretical knowledge and real life experience. It is designed to have a practical experience while passing through the theoretical understanding. The report is the result of three months internship program with Grameenphone Ltd. In the first chapter, I have tried to highlight the organization and its historical background. Here I have also mention the market aspect of Bangladesh Capital Market and Grameen phone IPO perspective. In the next chapter, I have discussed about my job responsibility in Grameenphone Ltd. In that part I have focused on the specific task that I have done during my three month staying in the organization under the Capital Market Division in Finance Department. After that, I have discussed about Bangladesh Capital Market and Grameenphone perspective. In the second chapter, I have explained the objective of my study and also mention the listing procedure. I have also explained the methodology regarding this report. Both primary and secondary data and information have been used in preparing this report. Also the listing procedures are discussed in this chapter. Like all study, this report has also certain limitations which were in some cases unavoidable. In the end I have concluded with the overall analysis of my assigned project which is on IPO consent and listing procedure in Bangladesh.
Table of Contents
1.0 Introduction....................................................................................................................8 1.1 Company Overview.......... ..... 8 1.2 History of Telenor AS.......................................................................................10 1.3 Grameen Telecom Corporation..........................................................................11 2.0 Objective.......................................................................................................................12 2.1 My Experience in Finance Department..................................................................13 2.2 The Job description...........................................................................................14 2.3 Training and Grooming......................................................................................14 2.4 Specific responsibilities of the job.....................................................................15 2.5 Non specific responsibilities..............................................................................15 3.0 Listing Procedure.............................................................................................................16 3.1 Works before Obtaining the Consent...................................................................17 3.2 Works after obtaining the Consent.........................................................................19 3.3 Findings and Analysis............................................................................................21 3.4 Scope.....................................................................................................................22 3.5 Methodology.........................................................................................................22 3.6 Limitation of the study.........................................................................................23 4.0 Bangladesh Capital Market Overview..........................................................................23 4.1 Definition of Initial public offering......................................................................26 4.2 Restriction of IPO face value...............................................................................27 4.3a Prospect of Book Building Method ...............................................................27 4.3b Book Building Method in Bangladesh Capital Market...................................28 4.3cThe Prospect of Dutch auction method............................................................29 4.5 Grameenphone Perspective...................................................................................32 4.6 Grameenphone Key Financial Ratios in 2007.......................................................33 4.7 Impact on Corporate Governance...........................................................................33 4.9 Changes in Capital Structure.................................................................................35 4.10a Existing Shareholding Structure........................................................................36 4.10b After Private Placement Shareholding Structure................................................37 5.0 Conclusion....................................................................................................................38 6.0 References.........................................................................................................................39 A. Appendix............................................................................................................................40
1.0 Introduction
Bangladesh is a huge market for the telecommunication business. As results there are many mobile companies are doing a great business in Bangladesh. In order to compete in the market the mobile companies are more focusing on value added services to create a strong position for the organization. Grameenphone Ltd is one of the legends in this telecommunication sector of Bangladesh through their services to the customers. As at 31 March 2009, Grameenphone had a SIM card market share of 48%. In addition to Grameenphone, there are five other mobile operators in Bangladesh. These operators and their market share according to Bangladesh Telecommunication Regulatory Commission (the BTRC) data as at 31 March 2009 are: Banglalink (with a market share of 21%), Aktel (with a market share of 14%), Warid tel (with a market share of 10%), Citycell (with a market share of 5%) and Teletalk (with a market share of 2%). In a report of Economic Impact of Mobile Communications in Bangladesh, Deloitte Consulting, UK states that Mobile services have contributed to overall telephony penetration and have helped to bridge the communication gap between rural and urban areas. In addition, by providing a universal and reliable telephony services, mobile services have promoted economic development and direct investment in the country. Bangladeshs mobile sector is estimated to have contributed BDT 260,000 million to the economy in year 2007, representing 6.2% of GDP. It was only 4.1% in year 2004
Grameenphone is now the leading telecommunications service provider in the country with more than 20 million subscribers as of March 2009. The company has so far invested more than BDT 14,000 crore to build the network infrastructure since its inception in 1997. It has invested over BDT 3,100 crore (USD 450 million) during the first three quarters of 2007 while BDT 2,100 crore (USD 310 million) was invested in 2006 alone. Grameenphone is also one the largest taxpayers in the country, having contributed nearly BDT 7000 crore in direct and indirect taxes to the Government Exchequer over the years. Of this amount, over BDT 2000 crore was paid in 2006 alone. Since its inception in March 1997, Grameenphone has built the largest cellular network in the country with over 10,000 base stations in more than 5700 locations. Presently, nearly 98 percent of the country's population is within the coverage area of the Grameenphone network. Grameenphone was also the first operator to introduce the pre-paid service in September, 1999. It established the first 24-hour Call Centre, introduced valueadded services such as VMS, SMS, MMS, fax and data transmission services, international roaming service, WAP, SMS-based push-pull services, EDGE, personal ring back tone and many other products and services. The entire Grameenphone network is also EDGE/GPRS enabled, allowing access to high-speed Internet and data services from anywhere within the coverage area. There are currently nearly 3 million EDGE/GPRS users in the Grameenphone network. Grameenphone nearly doubled its subscriber base during the initial years while the growth was much faster during the later years. It ended the inaugural year with 18,000 customers, 30,000 by the end of 1998, 60,000 in 1999, 193,000 in 2000, 471,000 in 2001, 775,000 in 2002, 1.16 million in 2003, 2.4 million in 2004, 5.5 million in 2005, 11.3 million in 2006, 16.5 million in 2007, and it ended 2009 with 21 million customers.
Grameenphone considers its employees to be one of its most important assets. GP has an extensive employee benefit scheme in place including Gratuity, Provident Fund, Group Insurance, Family Health Insurance, Transportation Facility, Day Care Centre, Children's Education Support, and Higher Education Support for employees, in-house medical support and other initiative.
Nordic Region Telenor Mobile Norway Sonofone, Denmark Telenor Mobile, Sweden
Fixed Telephone Lines Norway Sweden Denmark Board Cast Services in Nordic Regions Other Services/Units IT Solutions Automatic monitor reading Research & Innovation Telenor venture Aero mobile etc.
which Grameenphone provides its services to the fast growing rural customers. Grameen Telecom trains the operators, supplies them with handsets and handles all service-related issues. Grameen Bank currently covers more than 67,000 villages which are serviced by 2121 bank branches all over the countryside. The bank has more than 8 million borrowers, 97 percent of whom were women. Grameen Telecoms objectives are to provide easy access to mobile phone services in rural area of Bangladesh, creating new opportunities for income generation through selfemployment by providing villagers with access to modern information and communication based technologies.
2.0 Objective
This report is designed according to the process of listing in Capital market of Bangladesh. When any Organization will have to collect fund through initial public offer from the capital market of a country then that organization will have to follow the listing
12
procedure as mandatory. There are several laws regarding consent process for example SEC Ordinance 1969, Public Issue Rules 2006, Listing Regulation 1999 DSE and many other regulation in a scatter way. I have listing the whole procedure in a few words in my report. Initial Public Offering (IPO) listing procedure is mainly combination of two important processes. First one is Consent from Government and another one is Stock Exchange Listing Procedure. So, Combination of these two processes is called the IPO listing procedure. In my management report, I have divided the objective in two ways. The prime objective of preparing this report is to highlight and analyze the different steps of listing procedure. I will also try to find how it could be more easier so that it attracts more traffic in the Capital market. Its dominant floatation will not only attract others to be listed on the stock market, but also help the market to draw foreign or portfolio investment into Bangladesh. Another important topic will be discussed in my Report is about a new method of Asset valuation called book building method set by Dhaka Stock Exchange. The introduction of book building, a modern mechanism for IPO pricing, will encourage big and established companies, from both home and abroad, to be listed on the stock exchanges, as the book building method ensures a fair price of a company's stocks. Not only that, through this report I will also be able to acquire the knowledge and practice of a particular business organization. And as a student of business it will be helpful for me in my future life aspects.
employees about the updates and all other drafting and documentation related activities. Some non specific responsibilities were also I have to maintain like, handling IPO related queries from prospective investors/ applicants and maintaining log/record of queries/calls made by the prospective Sponsors/applicants.
14
Last of all, I have got training from Satcom IT Ltd. Satcom is the Post Issue manager of Grameenphone. They train me about some specific issues. They train me about a special software which will be needed in the process of managing received applications from applicants. They also train me about, How Non resident Bangladeshi (NRB) applicants can buy Grameenphone shares, what are the procedures they have to follow to buy shares, how they fill up the forms, where applicants will deposit their money, where applicants will find application forms, the whole process of IPO, etc.
the last year dividend, what is Net asset Value now, and all other required information. I am responsible for handling IPO related queries from prospective investors. I have to also maintain call log of calls made by the prospective Sponsors/applicants. I have to prepare the Changes of Capital Structure, Design the listing procedure and calculate the Share allocation, which I have broadly discussed in the next chapter.
16
3.1 Works before Obtaining the Consent from Securities Exchange Commission
1. Selection of Advisors: Before applying for consent every company suppose to have section of legal advisor. Legal Adviser is responsible for Security of internal information. Local Organization usually appoints only Local Advisor and multinational organization supposed to have two legal advisers both Local & Foreign. Grameen phone appoint Barrister Ishtiak as Local advisor and City group Legal House as Foreign legal advisor. 2. Completion of Valuation and restructuring: Before getting consent Organization will have to Completion of their total asset Valuation. Another important process is changing organization employee management and also restructuring and obtaining Reports thereon. Listed Organizations all top level employee usually has to follow by the Auditor. For example, Grameen phone changes their Organogram in last January. 3. Selection of Bankers to the Issue: Bankers Letter confirming opening of separate account for IPO and accepting their appointment as such Rule -18 of Public Issue Rules 2006. Bankers to the issue will be the important stake holder and they will be responsible for deposit and withdraw money of investors. 4. Selection of underwriters: Selection of underwriters & completing underwriting agreement is another essential process of IPO listing procedure. Underwriters are liable for successful float of all the shares. If the shares under subscribed bellow the whole offer, then underwriter will have to buy and hold that particular amount of shares. But, in case of Bangladesh Capital Market History, It never happens besides applications are over subscribe more than 10 times of offer. 5. Collection of NOC from Lenders: Collection of No Objection Certificates (NOC) from Lenders is a mandatory to get IPO approval. Lender should have to issue a letter that if the Company change their existing capital structure then they will not have any objection.
17
If the company have loan from several banks, then it is necessary to collect NOC from all the lenders. 6. Audit of Accounts: Organization supposed to have Audit of their accounts by authorised Auditor duly signed on each page, by the issuers chief executive officer/managing director, chief financial officer and issue manager according to the Rule -3 of Public Issue Rules 2006. The audited account shall not be older than 120 days of the end of the period for which the Financial Statement is prepared. 10 copies of Financial Statement have submitted to SEC, one copy each to DSE and CSE. 7. Credit Rating Report: Generally it takes at least two months to complete the Credit Rating after the Annual Audit is completed and credit report is mandatory for IPO listing process. Rule 18 (21) of the Public Issue Rules 2006 says that the application for consent shall be accompanied by some exhibits including Credit Rating Report. No issue of shares at a premium or issue of right shares shall be made by a public company unless the issue is rated by a credit rating company and declaration about such rating is given in the prospectus or right offer document (Sec.3 of Credit Rating Companies Rule 1996). 8. Agreement with CDBL: Before submission of Application to SEC, it is mandatory to complete agreement with Central Depository Bangladesh Limited (CDBL). CDBL maintain online transaction of securities by taking some fees and they listed all the investor in Stock Market. At present there in more than 1600000(sixteen lac investors) in Bangladesh Capital Market. After completion of agreement now company will have to take decision on depositing sponsors shares during Lock-in-Period with Custodial Bank or with CDBL. 9. Approval from Sponsors: At this point of IPO process now it is necessary to take approval from the sponsor and documentation the process, undertaking and information from Sponsors/ Directors, Declarations, Due Diligence etc.
18
10. Refund warrant guarantee: Company supposed to have opened a separate Bank Account for refund warrant purpose. It also called Mother Accounts for Refund Warrant. Through this account Company has to refund warrant money to the investor, who will not get the share. 11. Draft Prospectus: Before applying for IPO Company will have to drafting the abridge version of prospectus and dealing with Printers on printing of Prospectus, Forms, Refund Warrants, Letter of Allotment etc. 12. Application Submission: Application has to submit to SEC for consent to Issue with approved Prospectus and deposit the Govt. Fees of BDT 10,000. If the application is incomplete the SEC shall inform the applicant within 28 days of receipt of application and if the issuer fails to remove incompleteness within 30 days of communication, it shall file fresh application. (Rule -17 of Public Issue Rules 2006) 13. Consent from SEC: if the application and information, documents are provided by the applicant are reliable then SEC shall issue letter of Consent within 60 days of receipt of complete application.(Rule -17(4) of Public Issue Rules 2006). If the application submitted by the applicant is fresh and correct then usually it takes 45days to get IPO consent.
3.2 Works After Obtaining the Consent from Securities Exchange Commission
1. Submission of prospectus: After getting approval from SEC the first step is to submit the abridged version of prospectus in SEC for approval, usually before 1015 days prior to opening of subscription. And also have to submit signed copy of the Prospectus with Registrar of Joint Stock Company (RJSC) on or before the date of publication of prospectus in newspapers.( Section 138 of Companies Act 1994)
19
2. Announcement for the investor: Company will have to Publish of abridged version of prospectus in 4 newspapers (2 English + 2 Bengali) within 3 working days of the issuance of Consent Letter (Rule 5(1) of Public Issue Rules 2006). A paper clipping of published Abridged Version of Prospectus has to submit to SEC within 24 hours of publication in newspapers. Issuer Company will have to submit a diskette containing the text of vetted prospectus to SEC, DSE, CSE and Issue Manager and will have to post the full prospectus vetted by SEC in Websites of Issuer, SEC, DSE CSE & Issue Manager within 3 working days of the issuance of Consent Letter (Rule 6(2) of Public Issue Rules 2006). 3. Provide full prospectus: Issuer Company will have to submit 40 copies of printed prospectus to SEC and also submit printed copies of abridged version Prospectus and application forms to Bangladesh Embassies by EMS of postal departments within 5 working days from the date of publication of abridged version of prospectus in newspapers. 4. Application for listing: At this point Applicant should apply to all Stock Exchanges in Bangladesh and submit the vetted prospectus to the Stock Exchanges within 7 working days from the date of issuance of the Consent Letter (Rule 17 of the Public Issue Rules 2006). 5. Subscription period: Subscription List shall be opened and sale of securities commence after 25 days of publication of Abridged Version of Prospectus.(Rule 5 of Public Issue Rules 2006). Subscription List shall be closed after shall remain open for 5 consecutive banking days. by NRB be made to the Issuer Company within the closing date so as to reach the Company by the closing date plus 9 days.
20
6. Transaction rate: To apply spot buying rate (TT Clean) in US $ and UK pound and Euro of Sonali Bank for subscription of NRBs. Spot buying rate to be collected from Sonali Bank on the date of opening of subscription. 7. In case of under subscription: In case of under subscription, Issuer shall notify the underwriter to take up underwritten shares. The time limitation within 10 days of close of subscription date. Full payment to be made by the underwriter of underwritten amount within 15 days of Issuers notice. 8. Application to Stock Exchanges for Listing: For application for Listing issuer has to submit it to SEC attested copies of applications filed with Stock Exchanges within 7 working days of issuance of consent letter (Application shall be made by the Company at least 10 days prior to issue of first Prospectus (Regulation 3 (2) of DSE Listing Regulations). 9. Approval of listing: Granting of listing applications by DSE and CSE for issuing the share. The Exchange shall decide the question of granting permission within a maximum period of 6 weeks from closure of subscription lists. (Regulation 3(3) of DSE Listing Regulations)
application form. This application is available in websites and some selected places. The application form is written in English. So, some people might face difficulties to fill the application form. In that case Bengali version of the application form can bring better result. 3.3b online facilities arrangement Another recommendation could be launching online submission of the application forms. It would be really helpful for the non-resident Bangladeshi (NRB) people. So that they can download the application form and submit it through online. They dont need to depend on other people. It will also maintain their security. It would also reduce the time .I think its more hassle free and convenient way for them. 3.3c Bringing change in IPO procedure I think government should take some initiative to reduce the time of proceeding IPO. It takes minimum 120 days to get the approval. If some systematic change can introduce that would be fruitful both for the company and the economic development of the nation. The consent and listing Procedure is also very complex, so Government should change the procedure to more easier to so that, more Sponsors and investors can come to the Capital Market.
3.4 Scope
The scope of this report is bounded by the different underlying factors. It mainly includes the findings and analysis from 12 weeks work experience and the steps and various requirements of capital market to get IPO consent. Also the existing Capital market enlistment procedure and situation and the future market aspect.
3.5 Methodology
The report is mainly based on primary and secondary data collected from different sources. Since it is a report on IPO listing procedure in Bangladesh on Grameen Phone, the secondary data collected from various websites, various laws regarding Listing procedure.
22
Equivalently, primary data are assembled through conducting personal interviews with the authority of Grameen Phone, Dhaka Stock Exchange, Issue manager and post issue manager of Grameenphone.
involves of Central Depository Bangladesh Limited (CDBL). In addition to that, the government facilitated our capital market by structuring its monetary and fiscal policies in a pro-capital market manner. Bangladesh Government also set a restriction for the Sponsor. They will have to be publicly listed if their paid up capital exceeds 50 crore Bangladeshi Taka. It is a very good decision for Bangladesh Capital Market. Within very near future, Sponsors will have to be listed as mandatory in the capital Market. This constraint is certainly to attract more Foreign Direct Investment (FDI) and foreign portfolio flows. Our emerging economy mostly invited the funds from all over the world. Market capital has shown amazing growth from last few years. Although current market price earning ratio is higher than that of the neighbouring country but it is my belief that considering the demand for lack of avenue to invest, the capital market of our country has a bright and attractive future. The major reason for the existence of the stock market is to provide liquidity of shares and diversified instruments which helps increase market capitalisation. It also helps investors to gain more confidence and positively impact Gross Domestic Product (GDP) of our country. Neighbouring countries such as India has market capitalisation of 83% of their GDP and Pakistan has market capitalisation of more than 75% of their GDP. Comparatively, the Bangladesh capital market accounts for a far lesser share of its GDP indicating ample scope for future intensification in this sector. Bangladesh capital market has market capitalisation of only 18.5% of total GDP. This reflects more than 90 percent of Bangladesh's top 100 companies have not yet listed. If Bangladesh Government can bring them to the capital market, then our GDP can increase in huge portion. And as we know, our economy is an emerging one and there is ample scope of growth of our capital market. Our market cap, accounts for a lower share of our GDP in a comparative regional perspective. With the help of upcoming issues (IPO) we are very
24
optimistic that the market capitalisation is reach a higher level within a short span of time. Automation and introduction of Central Depository helped our capital market to grow considerably. A total listed issue in DSE is 223 of which 203 are shares 11 debentures and 9 mutual funds. The number of CSEs listed companies is 131 with 9 Mutual funds and 4 debentures. Investment Corporation of Bangladesh (ICB) is the public sector player in the capital market. In 2006, the market capitalisation was only Tk 22,670.67 crore, turnover was Tk 15.44 crore, DSE General Index was at 1,555.82 points and the volume was 33, 82,959. On the other hand, March 12, 2009, market capitalisation stood at Tk 1,02,246.75 crore, turnover reached an all time high at Tk 611.98 crore, DSE General Index stood at 2,653.11 points and volume was 3,75,41,462. Two stock markets in Bangladesh, one in Dhaka entitled Dhaka Stock Exchange (DSE) and the other in Chittagong namely Chittagong Stock Exchange (CSE) is in operation in Bangladesh. The Securities and Exchange Commission (SEC) was established under the SEC Acts, 1993 as a central regulatory agency overseeing the activities of the entire capital market including issue of capital, monitoring the issue of stocks and operation of the stock markets including regulating of portfolio market. The SEC has also a mandate to protect the interest of investors in order to speed up the industrialization process, and to this end, new measures are underway to strengthen the role and capability of the SEC. Central Depository Bangladesh Limited (CDBL) was incorporated as a public limited company on 20th August 2000 to operate and maintain the Central Depository System (CDS) of Electronic Book Entry, recording and maintaining securities accounts and changing the ownership without an physical movement or endorsement of certificates and execution of transfer instruments.
25
In an IPO the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), best offering price and time to bring it to market. For the individual investor, it is tough to predict what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. For minimize the risk and attract more investor to the market The IPO has three part as mention in the following diagram. 10% Shares are restricted for mutual fund; another 10% shares are restricted for Non Residence Bangladeshi (NRB); and rest of the 80% shares are allocated for the general public.
26
method of valuing IPOs. Some preconditions are set for companies willing to use the proposed book building method. These include, companies should (a) Have at least Tk. 300 million of net worth (b) Have at least 10% share of the paid up capital or shares worth of Tk. 300 million, whichever is higher (c) Have at least 3 consecutive years of viable commercial operations of which at least 2 years of profitable operations and no accumulated loss (d) Be audited independently and statutory by the SEC (e) Hold regular AGMs (f) Allocate IPO quota for both institutional and individual investors. Interestingly, IPO quota is directly (inversely) proportional to the size of IPOs for institutional (individual) investors, for example, institutional (individual) investors will receive 20%, 30%, 40%, or 50% (60%, 50%, 40%, or 30%) if the size of IPO is in between Tk. 300-500 million, Tk.500 million to 1 billion, Tk. 1-5 billion, or above Tk. 5 billion respectively. However, mutual funds and nonresident Bangladeshis are rationed by a fixed 10 percent irrespective of IPO sizes.
building method would enhance market depth, volume and value turnover, market capitalization, supplies of IPOs among others. In a developed capital market like Bangladesh, underwriters (either an investment bank or a syndicate of banks) play several key roles in the process of IPO book building such as origination, distribution, risk bearing, certification, price stabilization, financial analysis, auditing, advising, making the market, providing liquidity etc. Under the fixed-price method, underwriters of issuing companies propose a fixed price for IPOs through companys prospectuses. The SEC examines the prospectus and approves the fixed priced IPOs as long as the price is consistent with the companys financial and other economic fundamentals. However, both the SEC and underwriters are less able to determine the demand for IPOs and barely put efforts to verify whether the proposed fixed price represents a fair value. Moreover, underwriters discriminate in allocating IPOs because there is no hard and fast rule in distributing shares between individual and institutional investors. Book building method is also known as two-stage price discovery process because it implicitly determines IPO prices by supply-demand interactions. Both the offer and indicative prices are somehow derived from using either a direct valuation method (e.g. Discounted Cash Flow or DCF approach where IPO values are estimated directly from issuing companys fundamentals) or relative valuation method (e.g. market multiples approach where IPO values are computed indirectly using comparable companys earnings, leverage, profitability, liquidity, asset and debt utilization ratios).
traditional book building and fixed price methods because the role of underwriters in pricing IPOs is less significant here. Moreover, information asymmetries between underwriters and issuing firms are greatly reduced under the Dutch auction method. It should be noted here that the IPO under pricing is considerably less under the Dutch auction method. The popular search engine and advertising company Google used a Dutch auction when they floated IPOs in 2004. Interestingly, the under pricing of Google was much less than comparable firms in the same industry. In future, the SEC may consider permitting the Dutch auction process along with the proposed book building method.
30
Name Continental Insurance Limited Fidelity Assets & Securities Company Limited Paramount Insurance Company Limited Trust Bank Limited Phoenix Finance & Investments Limited Bangladesh Finance & Investment Co. Ltd. International Leasing and Financial Services Ltd. Union Capital Limited The Premier Bank Limited Golden Son Ltd. Shahjalal Islami Bank Limited
Manager to the Issue AAA Consultants & Financial Advisers AAA Consultants & Financial Advisers AAA Consultants & Financial Advisers AAA Consultants & Financial Advisers ICB Capital Management Ltd. Prime Finance & Investment Limited.
9,00,000
90,000,000
4,666,700 1,250,000
700,005,000 125,000,000
700,000
70,000,000
5,00,000
112,500,000
Prime Finance & Investment Limited Equity Partners Limited ICB Capital Management Ltd. Prime Finance & Investment Ltd. and Capital Market Services Ltd.
31
900,000
90,000,000
32
34
After getting consent from Securities and Exchange Commission there will be a change of around 9% in existing Share holder structure. Share will be deducted from two major share holders Telenor AS and Grameen Telecom (GTC). At present, Telenor AS hold 62% and Grameen Telecom (GTC) hold 38% of total share. After Private placement and Initial Public Offer these two Major share holder will have Telenor 56.45% and Grameen Telecom (GTC) 34.60%. Grameen phone will float BDT 553,762,000 through Private placement and 640,714,000 through general public.
35
Existing Share
12,151,747,970
12,151,747,97 0
100%
91.05%
-8.95%
Telenor
7,534,077,085
7,534,077,085
62.00%
56.45%
-5.55%
GTC
4,617,664,005
4,617,664,005
38.00%
34.60%
-3.40%
2,150
Nye Telenor Mobile Communicatio ns III AS 2,150 2,150 0.00% 0.00% 0.00%
2,150
2,150
0.00%
0.00%
0.00%
Grameen Kalyan
215
215
0.00%
0.00%
0.00%
Grameen Shakti
215
215
0.00%
0.00%
0.00%
36
4.15%
4,097,838,800
1.03%
4.80%
4,484,998,000
100.00 % 8,582,836,800
37
5.0 Conclusion
Grameenphone Ltd is still a growing company, in spite of all the success it has achieved so far. It holds kind of a monopoly position in the mobile telecommunications market. As it is the largest organization in Bangladesh it has investment of more than fourteen thousand crore taka investment. Last year, Grameenphone has paid to the Government nearly six thousand crore taka as Tax and Vat. If Grameenphone enlist to the Capital Market, then more investor can invest in safe and highly reputed company like Grameenphone. The important Finding is a lot of Organization is not interested to be publicly listed in Capital Market for the complex system of listing procedure. This reflects more than 90 percent of Bangladesh's top 100 companies have not yet listed. For that reason, market capital is only 18 percent of total GDP. Besides, India has more than capital market of 80% of total GDP and China has more than 50%. Bangladesh Government also set a restriction for the investors. They will have to be publicly listed if their paid up capital exceeds 50 crore Bangladeshi Taka. It is a very good decision for Bangladesh Capital Market. Within very near future, Investors will have to be listed as mandatory in the capital Market. This constraint is certainly to attract more Foreign Direct Investment (FDI) and foreign portfolio flows. As I have attached with the Capital Market department of Finance division of Grameenphone, I have the privilege to work with some hard working officer. Being a contractual employee, I have work in IPO team, documentation for SEC consent, and contact with issue manager, Bankers to the issue. Regarding my working experience at Grameenphone, I gathered knowledge and experience that is going to help me to build my career in future. Working in the Capital market department of Grameenphone has enriched my knowledge about different terms and instruments that are essential for Finance.
38
6.0Reference:
Listing Regulation 1999 DSE Securities and Exchange Commission (Public Issue) Rules, 2006 SEC Gazette of 1987 SEC Ordinance 1969 http://www.csebd.com/cse/start.html http://www.secbd.org http://www.dsebd.org/ http://www.bdbusinessonline.com/ http://www.telenor.com/ http://www.Grameenphone.com http://www.bseindia.com/ http://www.bdstock.com/ipoperformance.htm
39
A. Appendix
1. Balance sheet of Grameenphone for the year 2005 and 2006
Balance Sheet 2006 2005
Assets Non Current Assets Property , plant & equipment-net Preliminary Expenses & Pre Launch costs Intangible Assets Investment in associates Long term receivables Long term deposits Deferred cost of connection revenue 55,449,164,614 852,739,929 1,876,551 10,683,812 446,017,752 56,760,482,658 41,580,044,378 971,743,406 11,112,325 341,489,041 42,904,389,150
Current Assets Inventories Accounts receivables, net Sub lease of Optical Fibre NW Advance, deposit and prepayments Advance Income Tax Other Receivable Current Account- VAT Cash & cash equivalents 990,627,520 4,265,169,238 1,896,650,746 413,449,442 3,684,706,012 902,353,971
Total Assets
Equity & Liabilities Shareholders' Equity Share Capital Share Premium Capital Reserve Deposit from shareholders Security Deposit from Subscribers Tax Holiday Reserve General Reserve Final Dividend Dividend Distribution Tax Retained Earnings 2,430,349,594 13,743,987 14,446,452 1,882,996 206,312,859 1,933,416,506 2,430,349,594 13,743,987 14,446,452 1,882,996 509,073,440 1,424,343,066
21,929,389,185 26,529,541,579
13,846,854,210 18,240,693,745
40
Non-Current Liabilities Loans and borrowings-net Deposit from agent & subscribers Finance Lease Obligations Deferred revenue-net Deferred Tax Liability Long Term Payables & Provisions Employee Benefits- provision for gratuity
Current Liabilities Accounts Payable Payable to Govt. & Autonomous Bodies Income Tax Payable Unearned Revenue VAT Payable Loans & Borrowings- current portion Finance Lease Obligation- current portion Deferred Revenue- current portion Interest payable on loans & borrowings Provision for expenses Subscription billed in advance Current Account- VAT Current Account- PCTO Bank Overdraft Intercompany Payables Dividend Payable Surcharge Payable Loan to shareholders Total Equity & Liabilities
4,785,508,575 3,966,033,492 5,583,848,289 2,210,715,005 1,666,953,009 966,942,871 195,538,056 375,407,714 28,757,002 2,873,743,207
5,217,516,786 3,620,151,318 2,256,003,086 977,716,337 648,561,462 938,263,887 189,853,846 228,777,171 68,317,574 1,884,115,392
22,653,447,220 66,756,657,557
16,029,276,859 49,536,663,862
2. Acknowledgement Receipt
41
42