The market for an initial public offering (IPO) of shares has already matured in Azerbaijan, Chairman of the Supervisory Board of the Baku Stock Exchange (BSE) Farid Akhundov told Report.
“Companies are already starting to think about this, and our task is to support their entry into the market, to prepare for this process. The conditions for entering an IPO are complex, but we can begin discussing the conditions with those who wish. First of all, companies must be profitable, have good management, a strategy for future prospects for investors and be ready to work publicly with minority shareholders. Not every company today can afford this and knows how to do it,” said Akhundov.
In his opinion, traditionally the financial sector can be a pioneer in the IPO market.
According to international practice, there are restrictions for state-owned enterprises to enter an IPO, he noted. For example, in Uzbekistan the state put up for IPO 2% of the shares of enterprises on its balance sheet [a list of 40 large enterprises for IPO has been formed, within which it is planned to offer about 2% of shares to the population], Uztelecom also put up for sale a 2% package in which 11,000 investors contributed.
“Private companies themselves determine their policy for public offering of their shares, it can be 10-20-30%,” added Akhundov.
Referring to the decree signed in August 2023 by Azerbaijani President Ilham Aliyev on measures to attract private investment in large state-owned companies and enterprises, he said that the sale of shares of state-owned companies, depending on the decision of the state, can be carried out through the stock exchange: “We are interested in so that this process goes through the exchange.”
According to the order, the list includes eight banks, companies and enterprises: International Bank of Azerbaijan OJSC (ABB, the biggest bank in the country), Baku Telephone Network LLC, Aztelekom LLC, Caspian Shipping Company (ASCO) CJSC, AzerGold CJSC, Azerkimya PA (Ethylene-Propylene Plant), Urea Plant and Methanol Plant.
“Among them, ABB is the most experienced in terms of public offering of shares through the stock exchange, it is possible to do this with the bank. Other enterprises do not have experience, so the state can decide how to prepare for this process. The state should decide whether there will be a sale of shares of these state-owned enterprises, banks and companies through the capital market,” Akhundov noted.
Proposals on measures to attract private investment in large state-owned companies and enterprises should be submitted to the Administration of the President of Azerbaijan by the end of 2024.
IPOs can lead to growth in the stock market, which has fallen to lows in recent years. At the same time, strengthening education in this area among investors and local companies plays an exceptional role in increasing the volume of transactions in the financial markets.
According to BSE statistics, in 2017 the Azerbaijani stock market accounted for 5.2% of the total securities market, however, its share decreased to 0.33% in the first quarter of 2024. The local stock market accounted for 82.7% of the corporate securities market in 2027, but only for 1.6% this year.