Home ›› 25 Jul 2021 ›› Front
Niaz Mahmud
A consulting firm appointed by the Bangladesh Securities and Exchange Commission has recently submitted its final report with a restructuring plan for the state-run Investment Corporation of Bangladesh, which has been reportedly plagued by various irregularities.
The government had earlier decided to overhaul the corporation against the backdrop of its deviation from its mandate and the current stalemate.
As part of the government move to restructure the state-run ICB and its subsidiaries, the regulator of the country’s capital market, popularly known as BSEC, appointed A Wahab & Co, chartered accountants, last year to assess the ICB’s overall operations.
The firm was also appointed for reviewing the ICB’s current and past financial and non-financial performances, overall activities and its roles in capital market development as a state-owned investment institution.
The consulting firm in its five-phased restructuring plan, which would be implemented over the next 24 months, has strongly suggested for pulling the state-owned ICB from the edge of a possible financial collapse and forge a sustainable path forward.
According to the report, the share market situation had worsened further due to the ICB’s failures in collecting any debt from the manufacturing industries as well as non-banking financial organisations that are not related to the stock market.
Commenting on the report, BSEC Chairman Shibli Rubaiyat-ul Islam said: “The restructuring plan has been made for further strengthening the ICB’s capacity in order to support the capital market properly.”
Rash investment
ICB’s core objective is to promote the capital market and ensure the entry of prospective companies in the stock market.
According to BSEC, the state-owned ICB itself has been facing a decline in profit and thereby losing equity over the past several years, particularly in FY2018-19 and FY2019-20.
The country’s lone state-run investment corporation quite often drew public attention because of its alleged investment in a large number of listed and non-listed companies’ shares with weak fundamentals without research.
Even, the state-run investment corporation has now huge investment in 14 delisted companies’ shares. They were delisted from bourses due to low performance.
The companies are- AB Biscuit, Aroma Tea, Dhaka Vegetable Oil, Froglegs Export, Gem Knitwear Fabrics, Islam Jute, Karim Pipe Mills, Mark BD Shilpa, Meghna Vegetable Oil, Milon Tanners, Paper Converting, Paragon Lather, Progressive Plastic and Quasem Timber.
Besides, the corporation has also invested in ‘Z’ category companies shares. It invested in such 26 companies.
The companies are: ICB Islamic Bank, Family Tex (BD), Dulamia Cotton Mills, BD Welding Electrodes,
United Airways (BD) Limited, Alltex Industries, Aramit Cement, Bangladesh Industries Finance, Beximco Synthetics, C & A Textiles, Fareast Finance, Generation Next Fashions, Golden Son, Imam Button, Intech Online,
Keya Cosmetics, Mithun Knitting, Peoples Leasing, Prime Finance, R. N Spinning, Sunline Insurance, Tallu Spinning, The Dacca Dyeing, Tung Hai Knitting & Dyeing and Usmania Glass Sheet Limited.
‘Good leadership, better investment’
A Wahab & Co, in its report said: “We consider that under the current structure, ICB does not have the financial capacity to finance any organisation either in the form of loan or lease, like the bond of the debenture.”
The chartered accountants also added: “Our recommendation for restructuring is also to divest from these securities and use this cash to make better investments.”
The firm also recommended that the ICB must have a highly professional managing director with at least 20 years of capital market experiences and also with strong academic background in the field of accounting and finance.
“The ICB is heavily dependent on the state-run commercial and private sector banks for its funding, though it should approach the Bangladesh Bank for such loan at a subsidised rate so that it can pay off its high-cost borrowings and increase cash flows and profitability within a short term,” report said.
The report has underscored the need for engaging a professional team both for technical and institutional capacity building supports.
It also said: “The ICB must initiate discussions with the Finance Ministry and the BSEC immediately for getting institutional and policy support to implement the restructure plan.”
The firm recommended that the ICB should close its branch offices, saying: “The enhanced capacity of ICB will be devoted to other types of financing such as equity participation, pre-placement and different types of securities.”
To remain competitive in the long run, the ICB must offer products and services under its own initiative. This is not a step that addresses an immediate issue but one that focuses on long-term strategy, the firm suggested.
Poor performance
The ICB has three subsidiaries- ICB Capital Management, ICB Asset Management Company, and ICB Securities Trading Company. All these subsidiaries should be strengthened further, said the stakeholders.
Stock market expert Abu Ahmed told The Business Post: “The ICB must address the issues related to its decision-making process for approval of investment in different ventures in the form of private placement, pre-IPO placement, debentures, and bonds.”
ICB’s core objective is to promote the capital market and ensure smooth entry of the prospective companies in the stock market, he added.
The stock market in Bangladesh has witnessed a meltdown-like situation on several occasions, rendering a large number of investors impecunious over the years owing to the lacklustre role of the state-owned Investment Corporation of Bangladesh.
Formed in 1976, ICB was entrusted with the task of making the share market dynamic, but instead it has been continuously showing poor performance.
The role of ICB often comes under scrutiny whenever the country’s share market faces any collapse.
‘Profit-monger business centre’
Instead of developing the capital market and protecting the interest of general investors, ICB has long been quite busy making its own profit, ignoring the interest of the investors, market analysts say.
Experts said the organisation has forgotten its duty to protect the interest of general investors and bull market stability.
It should play a vital role to control the capital market, save it from further collapse and manipulations, but unfortunately, ICB is under the control of gamblers, they added.
A profit-mongering business centre like ICB has now been facing a debacle as like other ordinary investors for the last couple of years after the company’s earnings decreased due to fall in capital gain and increase in loan interest.
The Investment Corporation of Bangladesh’s profit declined for the last two consecutive fiscal years. The interest income, dividend income, capital gain and income from fees and commission are major sectors of income of the company.
According to the latest quarterly report, ICB’s 62 per cent profit declined in the third quarter (Jan-March 21) of FY21. Despite the huge profit loss, the company’s net profit still stood at Tk 38.42 crore during the same quarter, which was Tk 102.34 crore at the same period of the previous fiscal year 2019-2020.
The consolidated earnings per share (EPS) of ICB stood at Tk 0.48 in during the third quarter of the FY2020-21 against Tk 1.27 in the same period of the previous year.
The publicly-traded company’s net profit was Tk 56.49 crore in FY20, which was Tk 416.33 crore in FY18. Its net profit was Tk 60.13 crore in FY19.
Its net profit was Tk 461.57 crore in FY17 and Tk 331.64 crore in FY16, according to official statistics.
‘Overcoming crisis’
“The government was really concerned over the ICB’s performance as it could not support the capital market efficiently. However, we are still trying our level-best to fix the organisation,” BSEC Chairman Shibli Rubaiyat-ul Islam told The Business Post.
Besides, the ICB had earlier sought a fund worth Tk 5,000 crore from the government exchequer to support the stock market. Apart from that, the organisation also recently floated Tk 2,000 crore bond to boost the share market.
