The Dhaka Stock Exchange (DSE) is set to make history as it launches secondary market trading of preference shares tomorrow (15 December) for the first time, marking a significant step in diversifying instruments available in Bangladesh's capital market.
According to the DSE, trading will begin with the preference shares issued by Renata PLC, one of the country's leading pharmaceutical companies.
The preference shares will be traded on the Alternative Trading Board (ATB) of the Dhaka bourse, which was created to facilitate transactions in securities that are not listed on the main trading boards.
The opening of trading will be formally inaugurated by DSE Chairman Mominul Islam. Renata's Managing Director and Chief Executive Officer Syed S Kaiser Kabir is also expected to be present at the inauguration ceremony, underscoring the importance of the occasion for both the issuer and the exchange.
The Alternative Trading Board was introduced on 4 January 2023 to provide an automated, efficient and cost-effective platform for trading a wide range of financial instruments outside the traditional equity market.
The ATB allows listing and trading of equity securities, debt instruments, open-end mutual funds, and alternative investment funds, offering greater flexibility to issuers and investors alike.
The inclusion of preference shares in secondary market trading further expands the scope of this platform and is expected to deepen market sophistication.
Renata received approval from the Bangladesh Securities and Exchange Commission in July to raise Tk325 crore through the issuance of fully convertible preference shares.
The drug maker stated that the funds would be used primarily to partially repay existing loans and borrowings, thereby strengthening its balance sheet.
Fully Convertible Preference Shares are hybrid instruments that combine features of both equity and debt.
They typically offer preferential treatment in terms of dividends and, after a specified period or upon meeting certain conditions, can be converted into ordinary shares of the issuing company.
In Renata's case, the preference shares carry a six-year tenure. Conversion into equity is scheduled to begin in the third year, with 25% of the shares converting annually over the subsequent four years, according to market sources.