Free Market Economy: You have two choices; Respect it or Abuse it.
For our Leaders, Regulators, Corporates, Investment Bankers and the investing intermediaries, this is a big wake up call. What is happening in our neighbourhood is a big eye opener. Grameenphone, Bangladesh’s biggest mobile firm with over 22 million subscribers is owned by Telenor a Norwegian company and Grameen Telecom a non-profit company founded by Muhammad Yunus a pioneer in microfinance. On October 4th 2009,Grameenphone opened the largest initial public offering (IPO) in the history of Bangladesh aiming to raise 4.86 billion taka($70 Million) from Bangladeshi’s at home and abroad. Until 18th October the issue was heavily oversubscribed.
No, there were no smart investment bankers who became selling agents. Nor were there any advertisements creating a hype. Nor was there a grey market premium to attract subscriptions. There was an honest intention to help investors participate in the wealth building process.
True value was offered to the investors. Money was left on the table for the investors. The offer price values the company at only 3.3 times its 2008 earnings before interest, tax, depreciation and amortisation. This looks very cheap compared to Bharti Airtel, India’s biggest mobile phone company, which is valued, over 10 times its EBITDA. The idea was to make the first time shareholders very happy and build trust in the capital markets. The goal was to create an equity cult among the Bangladesh people.
Kudos to Muhammad Yunus the father of micro finance for another feather in his cap. He is a strong brand in Bangladesh and he could have used it to over price the IPO and made a huge profit, but he chose not to do so. Reputation was more important than money. A true, philanthropist, to have priced the offering so attractively priced so that every investor would benefit. This is what true leadership is about. I am sure this is going to change the way Bangladeshi’s invest and it will start a new wave of the equity cult.
India needs such leaders if we wish to achieve a double-digit growth and have a healthy and a vibrant capital market.