21 OTC firms head for small-cap platforms

The investors who have stock market memories of the 1990s may wake up to see some of the then-popular scrips back in action after years on the street of Motijheel in Dhaka.

Twenty-one of the 61 over-the-counter (OTC) market companies are set to come back to trading and the capital market regulator has already finalised the list based on the companies' revival plan.

Sources at the Bangladesh Securities and Exchange Commission (BSEC) said the regulator is likely to issue a notification to stock exchanges this week to let the 21 OTC firms get into the newly built small-cap or SME platforms of bourses.

The firms must convert their shares into electronic ones from the old-fashioned paper certificates before the reappearance.

Of the 21 firms, eight are already in operation and need to raise capital from investors to go ahead with their business.

The companies are Apex Weaving and Finishing Mills, Bangladesh Hotels Ltd, Bengal Biscuits, Gachi Hata Aquaculture Farms, Himadri Ltd, Rangamati Food Products Ltd, Wonderland Toys, and Yousuf Flour Mills Ltd.

The other 13 heading towards the SME Board are not in operation but got their business revival plan approved by BSEC.

The list includes Al-Amin Chemical Industries, Alpha Tobacco Manufacturing Company, Amam Sea Food Industries, Ashraf Textile Mills, Bangladesh Electricity Meter Company, Bangladesh Leaf Tobacco Company, Bengal Fine Ceramics, Bionic Sea Food Exports, Dhaka Fisheries, Excelsior Shoes, Lexco Ltd, Meghna Shrimp Culture Ltd, and Raspit Data Management.

Each of the 21 firms would be entitled to raise capital from the SME or small-cap platforms of the bourses, subject to case-to-case regulatory approval, through qualified investors offer (QIO), said BSEC officials.

Meanwhile, the BSEC, based on the detailed analytical report on the companies' business submitted by Dhaka Stock Exchange (DSE), also has decided to allow 19 OTC firms to get into the newly built Alternative Trading Board (ATB) of the bourse to offer investors liquidity – the opportunity to sell assets with ease.

Some of the firms have the potential to be back in business and if they successfully advance and comply with all the criteria, they also may get relisted to the mainboard of the bourses, said a BSEC official.

On the other hand, the remaining 21 OTC firms which did not seek to reappear in the public market or failed to show any hope for revival are set to be ousted from the OTC and go private through the entrepreneurs buying back public shares.  

The companies include Arbee Textiles Ltd, Azadi Printers, Bangladesh Chemical Industries, Bangladesh Dyeing & Finishing Industries, Bangladesh Luggage Industries, Bangladesh Zipper Industries, Chic Textiles, Eagle Star Textile Mills, and German Bangla JV Food Ltd.

Gulf Foods Ltd, Hill Plantation, Jessore Cement Company, M Hossain Garments Washing & Dyeing, Maq Enterprises, Phoenix Leather Complex, The Engineers Limited, Tulip Dairy and Food Products, Padma Printers and Colors, Bangladesh Plantation, Khaza Mosaic Tiles & Stone Industries, and Jago Corporation are set to leave the market.

 The OTC overhauling plan

DSE launched its OTC platform in October 2009 with 51 companies that were ousted from the main trading board due to their non-existent or non-operational status, or non-compliance with the listing criteria which included converting shares into electronic format, conducting general meetings, and paying listing fees.

In the second phase, 29 more listed companies were sent to the OTC.

Meanwhile, more than one and a half dozen companies came back to the main market as they demonstrated improvement in business alongside complying with listing regulations.

Most of the OTC firms were subject to the 1996 pump and dump schemes and later either lost the edge in business or suffered from the indifference of their entrepreneurs.

Some have their huge properties, worth over billion of taka even, left unutilised, some are struggling with high debts.

"We are working for the OTC companies with a market-friendly intention so that all the stakeholders can reap benefits," said BSEC Commissioner Professor Shaikh Shamsuddin Ahmed.

"One of our primary functions is to assist companies to perform towards the goal of its investors," he told The Business Standard regarding the regulator's role to bring the almost out-of-mind companies back on track.

Last year BSEC advanced with its OTC overhauling plan not to let the virtually nonfunctional OTC market exist as it barely matches between buyers and sellers.

Under the overhauling plan, OTC firms apparently either have to be in the new SME board or go private and some in the middle are set to be in the ATB.

ATB is here to host the secondary transactions of any securities while the SME platform is allowing small companies to raise their capital not exceeding Tk30 crore from qualified investors only.

Retail investors only can sell stocks in the SME platform while they can both buy and sell in the ATB.

DSE, being instructed by BSEC, conducted its site inspections, financial statement analysis, and interactions with the company's management and finally submitted a detailed report to the regulator later last year.

They found around one-third of the OTC firms in operations and these firms parted their way in terms of being in the market or leaving.

Investment bankers said, if the existing owners are reluctant or incapable, the regulator seemed to be encouraging new investors who can take over and run the dormant companies to follow the footprint of once-OTC company Wata Chemicals which came back in production and trading in 2014 as new entrepreneurs took it over and lenders supported its revival plan.

BSEC has reconstituted several listed firms' board of directors this year as these were not serving their shareholders' interest enough.  

"However, some firms may face difficulties. We try our best to be useful to those," Dr Shaikh Shamsuddin Ahmed said, referring to the efforts to help revive OTC firms.

"Also, we consider appropriate measures against those who do not comply with the rules and regulations meant to protect the interest of investors," he added.

In recent months, shares of most low-cap listed companies skyrocketed with some quarters counting on the ongoing regulatory efforts to push poorly performing firms to do better and experts are concerned if there is any market manipulation.

Last week BSEC instructed DSE to look into the matter.