IPO Analysis (A Case Study on Grameenphone)

Faculty of Business Studies Jahangirnagar University

Savar, Dhaka-1342

IPO Analysis

(A Case Study on Grameenphone)

Course Title: Financial Markets and Institutions Course Code: EFIN 512

Submitted to:

Mohammad Yousuf Harun Lecturer

Department of Finance and Banking Faculty of Business Studies

Submitted By

Group Name: VIGILANCE Group Leader: Md. Shahinuzzaman

GROUP MEMBERS

Name ID Md. Shahinuzzaman 20142084 Md. Rezaul Islam 20142061 Md. Rihan Uddin 20142045 Md. Ferdus Ali Munshi 20142013

Department of Finance and Banking

Faculty of Business Studies Jahangirnagar University

Savar, Dhaka-1342

May 8, 2015

May 8, 2015 Mohammad Yousuf Harun Lecturer Department of Finance and Banking Faculty of Business Studies Jahangirnagr University Subject: Submission of the Report on “IPO Analysis (A Case Study on Grameenphone)” Dear Madam: It is our enormous pleasure to bring up here the report “IPO Analysis (A Case Study on Grameenphone)” Thank you very much for appreciation you provide us during the period. We appreciate the opportunity to complete this charge within stipulated time. Any shortcomings or mistakes are absolutely our fault we would always be available and ready to explain that further. Sincerely yours, Md. Shahinuzzaman On behalf of group “Vigilance” Spring 2015 EMBA

ACKNOWLEDGEMENT

It’s our immense pleasure to complete this study in due time by grace of almighty Allah. We are grateful to those people who helped us a lot during the preparation of the report. We wish to express our profound sense of gratitude to our course teacher ‘Mohammad Yousuf Harun, Lecturer, Dept. of Finance & Banking, Faculty of business studies’ for her inspiration, guide, valuable suggestion, sympathetic advice, and enthusiastic encouragement made throughout the course of study work. Moreover, we like to avail the opportunity to express our deep gratitude and regards to Grameenphone Ltd and DSE for making available information on online.

Table of Content SL Particulars Page

No. Executive Summary 1

1. Introduction 1 1.1 Definition of IPO 1 1.2 Reasons for offering IPO 1 1.3 Disadvantages of an IPO: 2 1.4 Methodology 2 1.5 Objectives of the study 2

2 Initial Public Offering Process: 3 2.1 Works before Obtaining the Consent from Securities Exchange

Commission 3

2.2 Works after Obtaining the Consent from Securities Exchange Commission

6

3 Process Followed by Grameenphone for going Public 7 3.1 Activity before Obtaining the Consent from SEC 7 3.2 Activity after Obtaining the Consent from Securities Exchange

Commission 9

4 The Performance Grameenphone after IPO 11 5 Analytical Findings 14 6 Conclusion 15 References 16

List of Figure

Figure No

Particulars Page No

1 Works before Obtaining the Consent from Securities Exchange Commission

3

2 Works after Obtaining the Consent from Securities Exchange Commission

6

3 Grameenphone day to day price update January 2010- January 2015. 11 4 Grameenphone monthly total no of trade January 2013- May 2015. 11 5 Grameenphone Share Distribution 12 6 Grameenphone dividend History Chart. 12 7 Grameenphone yearly Net Asset Value in Million 2004-2014. 13 8 Grameenphone yearly Earnings per Share 2004-2014. 13

1

Executive summary

This study is the result of our understanding about what are IPO and IPO listing procedure in Bangladesh. In the introduction, we have briefly discussed about IPO. What it is. In the next we have also explained the methodology regarding this study. Secondary data and information have been used in preparing this study. Then comes the Analysis part, where we have explained the listing procedure. We have divide listing procedure in two Parts according to their behavior, one is work before Consent and another is work after consent. In the whole listing procedure, the works are separable like work before IPO consent and work after IPO consent. Here we have tried to show the performance Grameenphone after IPO. Like all study, this assignment has also certain limitations which were in some cases unavoidable. In the end we have concluded with a short discussion of overall analysis

1. Introduction

Initial public offering (IPO), also referred to simply as a "public offering" or "flotation," is when a company issues common stock or shares to the public for the first time. They are often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately owned companies looking to become publicly traded. 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. 1.1 Definition of IPO

IPO means Initial Public Offering. Basically it means first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded. In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market. If any securities sale to more than 35 people is called a public offering, and it requires the fill up of registration statements with the appropriate regulatory authorities. 1.2 Reasons for offering IPO

When a company lists its securities on a public exchange, the money paid by investors for the newly-issued shares goes directly to the company. An IPO, therefore, allows a company to tap a wide pool of investors to provide it with capital for future growth, repayment of debt or working capital. A company selling common shares is never required to repay the capital to investors.

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Once a company is listed, it is able to issue additional common shares via a secondary offering, thereby again providing itself with capital for expansion without incurring any debt. This ability to quickly raise large amounts of capital from the market is a key reason many companies seek to go public. There are several benefits to being a public company, namely:

Bolstering and diversifying equity base Methodology of the Study Enabling cheaper access to capital Exposure, prestige and public image Attracting and retaining better management and employees through liquid equity participation Facilitating acquisitions Creating multiple financing opportunities: equity, convertible debt, cheaper bank loans,

etc. Increased liquidity for equity holder

1.3 Disadvantages of an IPO: There are several disadvantages to completing an initial public offering, namely:

Significant legal, accounting and marketing costs Ongoing requirement to disclose financial and business information Meaningful time, effort and attention required of senior management Risk that required funding will not be raised Public dissemination of information which may be useful to competitors, suppliers and

customers. We have used only secondary data source to conduct the study. The sources of secondary data are: Secondary information was collected from different web site related to IPO listing procedure in Bangladesh. We have collected much of the information through the internet and those are mentioned in the bibliography page.

1.4 Methodology

This is a secondary data based study. Information has been collected from various secondary sources like journal articles, annual reports of different banks, books and different websites (stockbangladesh.com, dsebd.org, Grameenphone.com). The two objectives of the study are subject to be achieved through the secondary data review and the qualitative discussion. 1.5 Objectives of the study

The main objectives of the study are

To highlight and analyze different steps of listing procedure followed by Grameenphone ltd.

Highlights on the IPO performance of Grameenphone ltd.

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2. Initial Public Offering Process:

An initial public offering or IPO is a mechanism for companies to make available for the first time shares of their stock. Its purpose is to either raise capital for a new company or to fulfill a desire by an existing company to make their shares available to the public. Whether it is a new or existing company, the IPO process follows a fairly straight forward path with precise steps along the way. There are some instructions you have to follow to get consent from Securities Exchange Commission. These instructions are mandatory for investors. Through this process Investor has to organize all the relevant information. We have divide listing procedure in two Parts according to their behavior, one is work before Consent and another in work after consent. In the whole listing procedure, the works are separable like work before IPO consent and work after IPO consent. 2.1 Works before Obtaining the Consent from Securities Exchange Commission

Figure 1: Works before Obtaining the Consent from Securities Exchange Commission

Selection of Advisors

Completion of Valuation and restructuring

Selection of Bankers to the Issue

Selection of underwriters

Collection of NOC from Lenders

Audit of Accounts

Credit Rating Report

Agreement with CDBL

Approval from Sponsors

Refund warrant guarantee

Draft Prospectus

Application Submission

Consent from SEC

4

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.

2) Completion of Valuation and restructuring: Before getting consent Organization will

have to complete their total asset Valuation. Another important process is changing organization’s employee management and also restructuring and obtaining Reports there on. Listed Organization’s all top level employee usually has to follow by theAuditor.

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, 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. 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 authorized Auditor duly signed on each page, by the issuer’s 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).

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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 are 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.

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 a bridge

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.

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2.2 Works after Obtaining the Consent from Securities Exchange Commission

Figure 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 10-15 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)

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 Rules2006).

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

Submission of prospectus:

Announcement for the investor

Provide full prospectus

Application for listing

Subscription period

Transaction rate

In case of under subscription

Application to Stock Exchanges for Listing

Approval of listing

7

5working 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 Rules2006).

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 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.

6) Transaction rate: To apply spot buying rate (TT Clean) in US $ and UK pound and

Euro of Sonali Bank for subscription of NRB‟s. Spot buying rate to be collected from SonaliBank 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 is within 10 days of close of subscription date. Full payment is 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 7working 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

3. Process Followed by Grameenphone for going Public: 3.1 Activity before Obtaining the Consent from SEC: 1) Advisor selection: First companies have to select a legal advisor. Legal Adviser is

responsible for Security of internal information. Local Organization usually appoints only one 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.

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2) Valuation and restructuring: Before getting consent Organization will have to Completion of their total asset Valuation. Another important process is changing organization employee management, also restructuring, and obtaining Reports thereon. Listed Organization’s all top-level employee usually has to follow by the Auditor. For example, Grameenphone 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 stakeholder 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. 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 authorized

Auditor duly signed on each page, by the issuer’s 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 a credit rating company rates the issue 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

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. 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.

10) 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.

11) 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)

12) 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 Activity 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 10-15 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)

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.

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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.

6) Transaction rate: To apply spot buying rate (TT Clean) in US $ and UK pound and Euro of

Sonali Bank for subscription of NRB’s. 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 is within 10 days of close of subscription date. Full payment has 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)

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4. The Performance Grameenphone after IPO

Figure 3: Grameenphone day to day price update January 2010- January 2015.

(Source: dsebd.org) It has been noted that the Grameenphone Lowest Price 139.1 and Highest Price 398.6.

Figure 4: Grameenphone monthly total no of trade January 2013- May 2015.

(Source: dsebd.org) From above figure it has been seemed that highest value: 5352, lowest value: 250.

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Figure 5: Grameenphone Share Distribution

(Source: Stockbangladesh.com)

Figure 6: Grameenphone dividend History Chart.

(Source: Stockbangladesh.com)

60

120

205

140 140

0

50

100

150

200

250

2009 2010 2011 2012 2013

GP-Dividend History Chart

4% 3%3%0%

90%

Share Distribution

Institute Public Foreign Govt. Director

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Figure 7: Grameenphone yearly Net Asset Value in Million 2004-2014.

(Source: Stockbangladesh.com)

Lowest NAV in 2004-11.4m, and Highest in 2009-37.1m.

Figure 8: Grameenphone yearly Earnings per Share 2004-2014.

(Source: Stockbangladesh.com) Lowest EPS in 2008-2009-2.5, and Highest in, 2014-14.7

11.415

20.2 21.5 22.7

37.1 35.6

23.6 26.323.1 23.2

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GP-Yearly NAV (M)GP-Yearly NAV (M)

5.7 5.7 6.2

2.5 2.5

12.1

7.9

1413

10.9

14.7

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

GP-Yearly EPSGP-Yearly EPS

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5. Analytical Findings

We want to address the current uncertainty about the timing of the IPO of Grameenphone (GP) and why we believe a successful stock market flotation will be a pivotal catalyst in our capital markets development.

“Grameenphone initial public offering is likely to be further delayed, despite fulfillment of the market regulator's conditions by the mobile phone operator, putting the pre-IPO investors, including the institutional ones in disarray. The government is now more focused on settling the ongoing crisis stemming from the BDR mutiny.”

Clearly we all recognize the need in the immediate aftermath the BDR mutiny tragedy for the government to deal with many pressing issues. But there is also a need to show the international community that Bangladesh is still a good place for foreign investors to consider.

Against this backdrop, we would like to discuss why approval by the SEC for a GP flotation to occur in Q2 is so important and address some potential concerns regulators may have: Firstly, the largest IPO in Bangladesh's history is likely to trigger greater interest from foreign investors to come to the Bangladesh market. There may be some potential concerns from the stock market authorities that a fresh demand for $65 million of capital from the market might affect the values of other stocks or indeed the overall level of the market. However, if the GP brand is sufficiently strong domestically and internationally, we are likely to see significant new interest from foreign as well as local investors.

Also, contrary to conventional economic wisdom, supply will likely create new demand. So we might argue that a successful GP flotation will help support the market by attracting new investors. This is particularly relevant as the current global stock market turmoil is increasing the interest in frontier markets like Bangladesh, which have low correlations with global markets. International investors will be attracted to invest in a GP issue not only on the basis of a strong brand, but also good corporate governance and transparency.

Although the proposed IPO will be domestic rather than specifically targeted at international investors, as was the original intention last summer, it would still be surprising if GP's first issue did not see purchases even in the secondary market from overseas buyers.

By contrast, a second delay to the GP issue will almost certainly send a negative signal to international investors about the commitment to developing Bangladesh's capital markets. The risk is that they focus on other frontier markets in Asia such as Vietnam and Cambodia.

There is a great deal of competition among countries for global investor attention. We need to ensure we maintain their interest and confidence in investing in the Bangladesh economy.

A second potential issue is the valuation of the proposed IPO. It is critical that we move away from the net asset value (NAV) method of IPO towards a more market-based valuation method. In that context, the proposal by the SEC to move to a book-building method of valuation is important and should be introduced as soon as possible. No owners will sell a business at a

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massive discount to their true value and a failure to change this will see the DSE/CSE fail to attract major companies to list.

Coming back to the GP issue, valuation techniques are complicated by typically focus on international and local comparisons for Price/Earnings (P/E) ratios. GP does not appear expensive to us at their Tk 7 face value that has been proposed.

Investors, who might potentially be interested in investing in GP or any other telecom companies that come to market, need to see their future earnings growth prospect, the outlook for new 3G (third generation) wireless networks, industry consolidation and cost reduction opportunities.

We still see significant scope for all the mobile companies in Bangladesh, including GP, to develop a broader range of value-added services, such as mobile banking, greater internet access, doctor on call, Cell Bazaar. This suggests the earnings prospects for them are reasonably attractive. But ultimately, the strong demand seen for the $ 60 million pre-IPO placement seen in December suggests valuations were not unreasonable.

In conclusion, we would argue that developing Bangladesh's capital markets is an important objective for the government. The decision to broaden the number of asset managers is a welcome step.

The SEC has also been taking some important initiatives in starting the book-building process. But it is important we recognize the damage that might be caused by yet another delay to the GP IPO.

Hopefully a successful flotation will provide the catalyst we need both to attract international investors and for the next phase of the stock market development.

6. Conclusion

Grameenphone remains its face value at TK. 10 like other companies share price. And add another TK 60 as premium. It adds because of company gradual increase of profit and reputation in cellular phone market. As because of participating in Grameenphone IPO more than two lake’s new BO (beneficiary owner) account open in different broker house. As a result many broker house increase their client and got more money to run their business. It was assumed previously that if Grameenphone comes into stock market then a massive penetration will occur in market. Like assumption reality is something different, that is because of Grameenphone Many people invest in share market but Grameenphone share not increase as so high as expected. In this report we found that Grameenphone don’t have the full privilege to fix the Initial Public Offering price by itself as Bangladesh Stock Exchange regulatory committee needs to approve it. Grameenphone made a history by introducing the largest budget on share and brought a huge change in the capital market in Bangladesh.

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