Nagad losses mount despite rising revenue

Nagad, a mobile financial service provider of the country’s Postal Department, is reporting gradually increasing losses every year, which reached a record Tk 262 crore in FY22 despite an uptick in the overall revenue.

During the year, Nagad's revenue rose by 49 per cent to Tk 517.18 crore, compared to Tk 347.46 crore posted in FY21. The mobile financial service provider's losses stood at Tk 262.10 crore in last FY, which was Tk 187.26 crore in FY21, shows the company’s financial statement.

The statement for FY22 further shows that Nagad has Tk 617.60 crore in loans, a current liability of Tk 3,027 crore, and total assets of Tk 2,473 crore.

Last month, the MFS firm got the nod of Bangladesh Securities and Exchange Commission (BSEC) to raise around Tk 510 crore through zero-coupon bonds.

‘A better idea than equity’

Speaking to The Business Post, BSEC Commissioner Shaikh Shamsuddin Ahmed said, “Nagad’s zero-coupon bond application was initially given conditional approval in August 2021, as it had no clearance from the Credit Information Bureau (CIB).

“Nagad received final approval (consent letter) from the BSEC last month after obtaining CIB clearance.”

Providing more details, “It takes a significant time for a tech-based company such as Nagad to become profitable. This is not the case for Bangladesh, but for most nations as well. Even Tesla faced such a situation.

“For such firms, issuing bonds is a better idea than equity. As such bonds are exclusively for institutional investors, and not for individuals, the risk is minimal. If Nagad manages to utilise the fund collected through the bond, the company will be able to achieve something great.”

A zero-coupon bond is a transferable, redeemable, and non-convertible bond. It is a debt security that does not pay interest. Instead, it trades at a discount, rendering a profit at maturity, when the bond is redeemed for its full face value.

Of the Tk 510 crore to be raised from zero-coupon bonds, Nagad will pay off loans with Tk 400 crore, and the rest will be used as working capital. The tenure of the bond will be five years.

Remarkable growth, projection

Nagad has achieved remarkable growth and success in the digital financial service industry in Bangladesh, with 70 million registered customers and a daily transaction value of over Tk 1,000 crore.

To cater to the growing demand, Nagad has launched an Islamic wallet, which allows customers to transact in a Shariah-compliant way and is expected to attract more users, the company said.

Like all other businesses, risks exist in the fintech industry. The company scrutinizes all the associated risks systematically using up to date risk evaluation techniques; the company added its prospectus.

In FY19, Nagad’s net revenue was Tk 7.89 crore, and losses stood at Tk 43.72 crore. In FY20, the firm’s net revenue reached Tk 119 crore, while losses stood at Tk 129.76 crore.

Responding to a query, Nagad’s Head of Public Communication Muhammad Zahidul Islam said, "Tech-based startup firms have to invest a lot in technology upgrades and product diversifications, and Nagad has done so too.

“Although the transactions and revenue increased, the profit did not, mainly due to this reason. We are optimistic about getting more returns in the coming years, as our client base is growing increasingly. We are projecting to become profitable by 2025."

Nagad projects its earnings to be Tk 1,144 crore in 2024, Tk 1,324 crore in 2025, Tk 1,532 crore in 2026, Tk 1,773 crore in 2027, and Tk 2,053 crore in 2028, the company’s financial statement for FY22 states. They anticipate a net loss of Tk 5 crore in 2024, followed by net profits of Tk 28 crore in 2025, Tk 64 crore in 2026, Tk 114 crore in 2027, and Tk 171 crore in 2028.

Nagad was launched on March 26, 2019. In March of 2023, the company launched remittance services with approval from the Bangladesh Bank.

Besides, the central bank on May 14 awarded a license to Nagad Finance PLC, allowing the firm to perform as a non-bank financial institution (NBFI) under Section 4 of the Financial Institutions Act, 1993.