The Bangladesh Securities and Exchange Commission (BSEC) has recently rejected the initial public offering (IPO) application of Zenith Islami Life Insurance, which sought to raise Tk15 crore from the capital market to meet regulatory requirements and expand its business.
The insurance company had planned to issue 1.5 crore ordinary shares at a face value of Tk10 each.
According to a BSEC official who preferred not to be named, the application was rejected due to several deficiencies. “The company is now required to address these issues and resubmit the necessary documents. Once these requirements are fulfilled, they may reapply for the IPO with a new set of documents.”
As stated in the company’s prospectus, Md Sayadur Rahman, a former president of the BMBA, holds 7.78% of the company’s pre-IPO shares. However, the Bangladesh Financial Intelligence Unit has frozen his bank accounts under the Money Laundering Prevention Act.
Under its business expansion plan, the life insurer aims to invest in FDR, government treasury bonds, the capital market, and cover IPO expenses. Specifically, the firm intends to allocate Tk8.40 crore for government treasury bonds, Tk2.80 crore for investment in FDR, Tk2.80 crore for investment in the capital market, and Tk1 crore for IPO expenses.
Zenith Islami Life, a 4th generation life insurance company, was established in August 2013. It engages in individual life and group insurance business.
SM Nuruzzaman, chief executive officer of Zenith Islami Life, told The Business Standard that the company had planned to enter the capital market a few years ago. However, the life insurer was unable to move forward with the plan due to the impact of the Covid-19 pandemic, he said, adding that given the current circumstances, the company will need more time before reapplying for the IPO.
According to the company’s prospectus, as of the end of December 2023, Zenith Islami Life collected a net premium of Tk28.34 crore, compared to Tk30.32 crore in the previous year. In 2023, the balance of the life fund stood at Tk17.76 crore, almost double compared to a year ago. Its investment has been increasing gradually and stood at Tk32.76 crore, which is 16% higher than a year ago. The authorised capital is Tk100 crore, while its paid-up capital is Tk22.50 crore.
In September 2020, the securities regulator exempted 26 insurance companies from the securities rule to enable them to be listed on the stock market under the fixed price method, including Zenith Islami Life.
These insurance companies can apply to the securities regulator for IPOs aiming to raise less than Tk30 crore. The minimum amount for raising capital through IPOs is now Tk15 crore for insurance companies. Under the facility, Zenith Islami Life applied to the commission for an IPO.
However, the securities regulator has set a requirement for companies with less than Tk30 crore in paid-up capital to invest at least 20% of their equity in the capital market if they want to get listed. Additionally, a company will have to raise at least Tk15 crore by offloading shares to the stock market.
