The Bangladesh Securities and Exchange Commission (BSEC) has rejected a Chartered Life Insurance Company Ltd application for an initial public offering (IPO), citing its past consecutive losses and an accumulated loss.
On 29 April, the new generation life insurer applied for a Tk15 crore IPO under the fixed price method at an issue price of Tk10 each, based on its 2019 audited accounts.
However, BSEC in a letter to the company's managing director on Tuesday, said Public Issue Rules do not allow any company to go public if it has accumulated and retained losses at the time of application.
And, as Chartered Life's earnings per share (EPS) have been negative for the four consecutive years up to 2019, and the consecutive losses pushed the company's net asset value per share below its face value of Tk10 over the entire period, the regulator is not in a position to allow the company in the bourses.
From 2016 to 2019 period, Chartered Life's annual losses per share ranged between Tk0.2 to Tk0.38, with a net asset value per share of Tk9.14 at the end of 2019.
Chartered Life's Company Secretary, Md Mijanur Rahman, told The Business Standard, the company posted a positive EPS for 2020 and its net asset value is also above Tk10 now. An opportunity to submit updated financial statements, which is a must now to comply with the insurance regulator's order, would change the course of the planned IPO.
Md Obaydur Rahman, managing director of the company's co-issue manager AAA Finance and Investments Ltd, said when the IPO application was submitted the company's actuarial valuation was not accomplished and that was why they were only able to submit the 2019 accounts to the BSEC.
The new generation of insurers are under pressure as dictated by the terms of the Insurance Act to join the bourses within a 3 year deadline since their inception which is already over.
Unfortunately, a number of companies are unable to comply with BSEC rules for going public as they are yet to make profits or make up their initial losses and bring their cumulative financials into positive territory.
The Insurance Development and Regulatory Authority (IDRA), BSEC, and the Ministry of Finance, have been jointly working on solving the problem since an insurance company is subject to a Tk5,000 fine for every day they take beyond the first three year deadline, to get listed in the stock market.
Chartered Life Insurance Company's total life fund grew to around Tk30 crore at the end of June, according to its Company Secretary, Mijanur Rahman.
Bangladesh is one of the least penetrated insurance markets in the world and an unusually high number of companies are competing to serve the same set of customers. However, optimistic experts believe there is scope for widening the customer base through product innovation.