Friday, 29 Mar, 2024
  Dhaka
Friday, 29 Mar, 2024
The Daily Post

Midland IPO rejected

AL EHSAN

Midland IPO rejected

Discussions raised in capital market

  • Mohammed Isa Badsha is number 33 as a sponsor shareholder in the public offering of Midland Bank which is bankrupt of Tk 500 crore
  • Midland Bank is far behind  Union and Global Islami Bank in terms of investment income and operating profit that’s are recently approved in the share market
  • Investors' investments are stuck due to floor price. This apprehension prevails in the minds of many - Abu Ahmed, Capital market analyst
  • Midland Bank started the process of listing in the capital market despite the adverse environment to fulfill the conditions of the license given by Bangladesh Bank - Khalid Mohammad Sharif, Company Secretary, Midland Bank

For the first time in the (initial public offering) IPO application, a bank's shares received fewer buyers than the demand has given rise to discussions in the capital market.

Earlier, even in the falling market, the response of the investors to the IPO application of the bank was several times higher than the demand.

About 26 percent of Midland Bank's 70 million shares slated for (IPO) remain unsold. At the face value of Tk 10, the bank allotted 7 crore shares to investors, which is only 10 percent of the total shares of the bank. Acting Managing Director of Dhaka Security Exchange (DSE) Saifur Rahman Majumdar told Daily Post that he has written to five companies to buy those shares as underwriters as per the rules.

He said, "Of the 7 crore shares allocated in the IPO for investors, 25.96 percent of the shares have been undersubscribed as no application has been submitted. These shares are now required to be purchased by the underwriters as per rules. That is why we have written to the issue manager.

The fourth-generation Midland Bank, licensed in 2013, received IPO approval from the Bangladesh Securities and Exchange Commission (BSEC) in September last year to raise Tk 70 crore from the capital market.

In the IPO process, the bank will issue 35 lakh common shares to employees. These shares will be locked in for 2 years. It is first time provision for the employees in the history of the banking sector of the country. The bank's IPO application process was conducted from February 16 to 23. It is 1 crore 81 lakh 69 thousand 850 in number said acting managing director of DSE Saifur Rahman Majumdar.

At face value, the amount of money is Tk 18 crore 16 lakh 98 thousand 500. The number of applications among qualified investors, ordinary and non-resident investors has fallen. As per BSEC IPO policy, the IPO will not be canceled if the application is less than 35 percent. BSEC spokesperson and executive director Muhammad Rezaul Karim told the Daily Post that underwriters are obliged to buy the shares of the reduced application.

According to the information given in the prospectus, the five companies acting as underwriters of Midland Bank in the capital market listing are Lanka Bangla Investments, state-owned ICB Capital Management, Sonali Bank's subsidiary Sonali Investments, Rupali Bank's subsidiary Rupali Investments and Prime Bank's subsidiary Prime Bank Investments Limited.

Among them, Lanka-Bangla Investments is also acting as the issue manager.

After receiving the instructions from DSE, letters have been sent to the remaining four underwriters to raise funds for the purchase of shares, said Chief Executive Officer of Lanka-Bangla Investment Limited Md Iftekhar Alam. According to information search, The IPO was approved in the 839th commission meeting of the company. Midland Bank has spent about Tk 4 crore on the people involved in getting the approval.

According to the information received, the name of Mohammed Isa Badsha is number 33 as a sponsor shareholder in the public offer of Midland Bank. As he is well known as a bankrupt, firstly Midland IPO get stumble here. Investors condemned the midland bank IPO by the demonstration on the street on February 26. But the Midland bank acts dumb authority.

Mohammed Isa Badsha is the Managing Director of Badsha Group. He took loan of Tk 500 crore from 8 banks in the name of various institutions including ship breaking. Instead of investing this loan money on industrial development, he smuggled the money to Canada. He bought a luxury house there. He bought a flat in Toronto's lakeshore area, created anonymously Business Company. He is now absconding in several cases filed in this regard. It is known that they smuggle money through over invoices in various countries including Netherlands, France, Germany, India and Malaysia.

Badsha Mia's elder son Isa Badsha is the entrepreneurial director of Midland Bank. He has 5 percent shares. Isa Badshah's company took a huge loan from Eastern Bank Agrabad branch against two companies named MM Enterprise and Jhuma Enterprise. The bank now has Tk 156 crore 37 lakh 98 thousand from these two institutions. One Bank's Jubilee Road branch owes Tk 168 crores from Musa & Isa Brothers. In the name of Jhuma Enterprise, Isa Badshah took Tk 56 crore from Shahjalal Islami Bank.

Exim Bank Khatunganj branch disbursed to Tk 16 crore 27 lakh. Mercantile Khatunganj branch owes Tk 75 crores to Isa Badsha. Meghna Bank Jubilee Road branch owes Tk 60 crore. Prime Bank owes Tk 5 crore 57 lakh of the loan taken in the name of Jhuma Enterprises. Al-Arafa Islamic Bank also owes a large amount of loan money to Badsha Isa. Eastern Bank's Agrabad branch auctioned the mortgaged properties of Isa-Musa Brothers in 2019. According to the auction notice in the newspaper, the borrowers of Eastern Bank Chittagong are Messrs MM Enterprise and Messrs Jhuma Enterprise. Both the establishments are owned by Mohammad Isa Badsha alias Mohsin and Mohammad Musa Badsha. Tk 33 crore 51 lakh 17 thousand including interest against loan to MM Enterprise till 21 January 2019 and Tk 122 crore 86 lakh 80 thousand 976 crore with interest against loan to Jhuma Enterprise. That is, the bank owes Tk 156 crore 37 lakh 98 thousand 63 including interest to the two institutions.

Midland Bank asked under what criteria the company whose entrepreneurial director is a defaulter and absconder has applied for IPO approval. Mohammad Sharif, Company Secretary of Midland Bank Limited, said, we are aware of Isa Badshah's loan default. Knowing that, BSEC has approved the IPO as per Section 17 (5) of BB Regulation. Isa Badsha's shares will be adjusted as per bank regulations. Accordingly, we also received a letter from Bangladesh. However, BB regulations do not mention how the shares will be liquidated or converted into money.

The company secretary also said, Isa Badsha has not been on our board for 4 years. He is only a sponsor share holder. He has no role in the management of the company. The disclosure of these information is mentioned in the IPO prospectus. The company secretary said that no provision has been violated in this case.

Secondly, Investors seen that this Midland Bank is far behind the two recently approved banks. This bank is far behind Union and Global Islami Bank in terms of investment income and operating profit.

According to the information received, the investment income of Midland Bank in the financial year ended 31 December 2021 was Tk 135 crore. Operating profit was Tk 157 crore. Union Bank's investment income was Tk 604 crore, operating profit was Tk 359 crore. Global Islami Bank's investment income was Tk 501 crore, operating profit was Tk 268 crore.

Besides, this bank is lagging behind in terms of EPS as well. Global Islami Bank's EPS was Tk 2 when it came to market. Union Bank EPS was Tk 1.77. There Midland Bank EPS is only 90 paise.

In this process, the last bank sector Global Islami Bank (former NRB Global Bank) collected capital of Tk 425 crore from the capital market. All shares were sold in the service's IPO.

Meanwhile, ordinary investors have suffered a lot by investing in these two banks after the listing. In such a situation, the question arises as to how this bank got the approval to be listed even after being behind these two banks in all aspects.

Thirdly, Capital market analyst and former Professor of Dhaka University Abu Ahmed said, “Investors' investments are stuck due to floor price. They can't sell even at a loss now. So interest in new IPOs has shown less. The reason is that many investors sell shares on the first day of trading. If there is no buyer now, who will sell to? This apprehension prevails in the minds of many."

When asked about the lack of response from investors, Midland Bank's Company Secretary Khalid Mohammad Sharif said, "Midland Bank started the process of listing in the capital market despite the adverse environment to fulfill the conditions of the license given by Bangladesh Bank. Now our condition is fulfilled.

“There has been an atmosphere of mistrust in the banking sector in recent times. Due to unfavorable environment in the capital market, the application of shares was not as per the target.”

As per current rules, investors apply for IPOs through their respective securities firms. Later, it was collected and reported to DSE by the securities companies.

Midland Bank's IPO has ICB as under-writer. State-owned investment institutions play a role as liquidity providers and market intermediaries in the capital market.

ICB's ability to provide brokerage and fund management services will encourage investors to apply for an IPO.

Similarly other institutions were selected to be appointed as under-writers. But Khalid Mohammad Sharif said that Midland Bank could not be satisfied with the initiative of these institutions in encouraging ordinary investors to buy shares.

Earlier, a kind of negative publicity was seen towards the shares of the bank, bringing forward the share price of the last listed bank to go below the face value. Khalid Mohammad Sharif believed that the bank's credit management, financial position including deposits, will attract investors to Midland Bank. But in reality it did not happen.

The bank said it plans to use the money raised from the capital market to invest in government and listed securities and complete the IPO process.

 

JH