The regulator has ordered the Dhaka Stock Exchange to stop the procedure to discuss a proposal on allowing the direct listing of Best Holdings Ltd as private companies can't raise funds from the capital market without initial public offerings.

The board of the DSE was set to discuss the proposal at a meeting today.

Rejaul Karim, a spokesperson of the Bangladesh Securities and Exchange Commission (BSEC), yesterday said the commission had asked the exchange not to go ahead with the plan.

The owner of the Le Méridien Dhaka hotel wants to offload 4.35 crore shares worth Tk 283 crore at an offer price of Tk 65 each.

In December 2016, the BSEC ordered the DSE and the Chattogram Stock Exchange not to go for direct listing of companies that are not owned by the government.

With the direct listing, existing investors and promoters can directly sell shares to the general public through stock exchanges.

Best Holdings' sponsors hold 52.01 per cent shares and private placement-holders own 47.99 per cent shares. Among the private placement shareholders, four state-run owned banks own 29.58 per cent of the paid-up capital.

The banks bought 25.75 crore shares for Tk 1,675 crore, or Tk 65 each, with a face value of Tk 10.

Sonali Bank owns 8.83 per cent share, Janata Bank 8.83 per cent, Agrani Bank 6.62 per cent, and Rupali Bank 5.30 per cent, according to a letter of the BSEC to the DSE on Tuesday.

In the letter, the commission raised a question about the direct listing move because of the regulations and flagged some non-compliance issues.

Best Holdings raised capital through private placements amounting to Tk 472.88 crore in cash and Tk 189.32 crore in other than cash from August 2019 to June 2020, which is contrary to the listing provisions, the commission said.

According to the BSEC letter, the company's net current assets from August 2016 to 2019 were reported as negative, which is contrary to the provision of the listing regulations.

The company intended to offload 4.35 crore shares, which is 5 per cent of the total shares of 87.10 crore.

This is non-compliance with the offloading requirement of 25 per cent of the paid-up capital of the company and price discovery process as per regulations, the commission letter said.

The BSEC also wanted to know whether the investment made by the four state-run banks would be considered as owned by the government.

It also asked how the DSE would address the non-compliance of the listing regulation.

An independent director of the DSE said a director was trying to push the company's direct listing by circulating a finance ministry letter.

"But the letter was not sent to the DSE, but the BSEC," he said.

In the letter, the BSEC was ordered to ease the direct listing rules and regulations for infrastructure-related companies.

State-run banks invested in some infrastructure-related companies and tourism-related company like Best Holdings, so the top officials of the lenders called for allowing allow them to go for the direct listing, the finance ministry letter said.

The Daily Star has obtained a copy of the letter of the ministry which contained no date and reference number.

Amin Ahmed, managing director of Best Holdings, could not be reached for comments over his mobile phone.