2021 ushers ray of hope for revitalising bond markets

A growing weight of evidence suggests that 2021 became one of the best on record for the bond markets. Corporate borrowers have shifted their eyes to the bond markets from the traditional bank loans for their funding needs.

In 2021, Bangladesh Securities and Exchange Commission (BSEC) approved 21 institutions to raise Tk 12,326 crore from the capital market through bonds and Sukuk.

The figure is 36.7 per cent higher than 2020 when 23 companies had raised Tk 9,017 crore via bonds, according to the BSEC data.

The rising figure indicated that the country’s moribund bond market is expected to be revitalised in days to come. In the last 10 fiscal years, ninety-nine companies raised Tk 60,010 crore, the data showed.

“Our stock market has remained equity-based for a long period. We’re focusing on bonds, debentures, Sukuk, and alternative investment options in the market,” BSEC Chairman Shibli Rubayat-Ul-Islam told The Business Post.

However, the bond issuances by several corporates came at a time when the economy was reeling from the fallout of the global Covid-19 pandemic.

The funds would largely contribute to strengthening the capital bases of the companies and organisations, allowing the economy to recover at a faster pace.

“Raising funds through different types of bonds can reduce pressure on the banking sector by meeting long-term and large-scale financing at a fixed rate,” City Bank Capital Resources Managing Director Limited Ershad Hossain told The Business Post.

In July this year, Pran Agro Limited and Thangamara Mohila Sabuj Sangha (TMSS) got the regulatory approval to raise Tk 150 crore and more than Tk 200 crore respectively through the bonds. 

Later, several companies joined the bandwagon of issuing bonds to finance the projects in the year.

BRAC, the world’s largest NGO, received BSEC’s nod to raise Tk 1,350 crore via zero-coupon bonds. It will use the proceeds to expand its microfinance activities. “We have a plan to raise funds from diversified sources to reduce our dependence on foreign funds,” BRAC Executive Director Asif Saleh told The Business Post.

“Raising funds through a bond is a new way of financing microfinance. That is why we’re availing of the option,” he said.

Apart from Pran, TMSS and BRAC, more companies opted for the new options this year.

Among them, IDLC Finance got the BSEC’s approval to raise Tk 500 core, EXIM Bank Tk 600 crore, Sajida Foundation Tk 100 crore, EXIM Bank Limited Tk 500 crore, IFIC Bank Tk 500 crore and Bangladesh Export Import Company (Beximco) Tk 3,000 crore.

In addition, HR Textile Mills was allowed to raise Tk 126.29 crore through a non-convertible zero-coupon bond, and AL-Arafah Islami Bank Tk 500 crore through a non-convertible zero-coupon and unsecured mudaraba perpetual bond.

In September, the BSEC approved the bond proposals of three financial institutions. Lanka-Bangla Finance issued a Tk 300 crore non-convertible zero-coupon bond, Shahjalal Islami Bank Tk 500 crore via mudaraba perpetual bond, and Islami Bank a Tk 800 crore via mudaraba perpetual bond.

In October, Delta BRAC Housing (DBH) and BRAC Bank also got the BSEC’s approval for raising Tk 300 crore and Tk 600 crore through the bonds.

In November, AB Bank was allowed to raise Tk 600 crore, Premier Bank Tk 200 crore, and Pubali Bank Tk 500 crore via unsecured perpetual bonds.

Southeast Bank and Meghna Bank were the latest to get the approval of the securities regulator to raise Tk 500 crore and Tk 200 crore through the subordinated bonds to strengthen their capital bases.