Only 0.9pc of Walton shares can be offered as IPO cut-off price set at Tk 315

The cut-off price of each share of Walton Hi-Tech Industries Limited has been set at a whopping Tk 315 through bidding of institutional investors, raising question about the company’s initial public offering as only 0.93 per cent of its total shares could be offered.

The Dhaka Stock Exchange on Monday disclosed the cut-off price of Walton shares.

As per the cut-off price, Walton will issue only 27.58 lakh shares or 0.92 per cent of its pre-IPO paid-up capital of Tk 300 crore.

The eligible investors would be given shares worth Tk 60.96 crore at Tk 315 a share while the general investors would be given shares worth Tk 39.3 crore at Tk 283 a share after 10 per cent discount.

A senior BSEC official told New Age on March 6 that they would consider scrapping the company’s IPO if the cut-off price crossed over Tk 300 for the sake of investors’ interest.

He said that with only around 1 per cent shares, if the cut-off price crossed Tk 300, Walton’s shares would fluctuate heavily and there would be chances of price manipulation on the secondary market.

He, however, said that it would be tough for the BSEC to halt the IPO process as the company was an influential one with multiple senior ministers visiting and praising its activities in recent times.

The Walton bidding held in between March 2 to March 5 under a method known as the Dutch auction for the first time in Bangladesh. It is a public offering auction structure in which the price of the offering is set after taking in all bids to determine the highest price at which the total offering can be sold.

As per the bidding process, 66 bidders will get shares on the basis of their bidding.

Among the top bidders, Islami Bank Capital bid at Tk 765 a share. Six organisations of IDLC bid at Tk 625 a share and three other organisations of IDLC at Tk 411 a share. Six organisations of LankaBangla bid shares of Walton at Tk 450 while United Securities at Tk 641 a share. The cut-off price would have to be approved by the BSEC.

Previously, the BSEC had reduced the price of MJL Bangladesh Ltd’s primary shares from the price that institutional investors had agreed to pay.

In the recent past, the regulator had challenged the justification of cut-off price of Bashundhara Paper Mills shares in its IPO, but later it did not reduce the price.

The BSEC on January 7 allowed Walton Hi-Tech Industries Limited to discover the cut-off price of its shares under the book building method for raising Tk 100 crore from the capital market through an initial public offering.

The company will use the Tk 100 crore of IPO proceeds in business expansion, paying bank loans and meeting the IPO expenses.

As per the entity’s audited financial statements for the year ended on June 30, 2019, the company’s net asset value per share and weighted average earnings per share of five financial years were Tk 243 (with revaluation) and Tk 28.42 respectively.

The company posted record earnings per share of Tk 45.87 in the last fiscal year, raising question about such jump just before the IPO.

The net asset value per share was Tk 138.53, which increased to Tk 243 after revaluation of assets.

AAA Finance and Investment Limited is the issue manager of the company’s IPO. (Source: New Age)