22 cos raise Tk 8,847cr fund through bonds, preference shares

At least 22 companies raised Tk 8,847.65 crore worth of funds from the capital market by issuing bonds and preference shares in the outgoing year 2022.

This, however, was 28 per cent less than the tally of Tk 12,326 crore raised by companies the year before.

The BSEC approved the bond proposals of a larger number of companies this year to keep the country’s economy stable amidst the macroeconomic slowdowns caused by the Russia-Ukraine war.

With bond funds, the companies were expected to increase their capital base, helping the country’s economy recover at a faster pace hit hard by the war.

Ershad Hossain, managing director of City Bank Capital Resources Limited, told The Business Post that raising funds through bonds could reduce pressure on the banking sector of an economy by meeting long-term and large-scale financing at fixed rates.

Some 21 firms last year were given nod to raise funds through the issuance of bonds. Of them, Beximco Limited alone raised Tk 3,000 crore by issuing Sukuk, an Islami Shariah-compliant financial instrument.

Beximco was the country’s first company to raise fund through the issuance of Sukuk bond.

Financial institutions, insurance companies, corporate bodies, asset management companies, mutual funds, and high-net-worth individuals are eligible to purchase bond units through private placements.

Bonds are typically less risky than stocks and therefore yield lower expected returns than stocks.

Bondholders are just creditors for a company, not owners, according to securities guidelines.

Asif Saleh, executive director of Brac, told The Business Post, “We had a plan to diversify the sources of funds to reduce the dependency on foreign funds.”

“The issuance of bonds for sourcing funds is a new way of financing for microfinance. That’s why we are collecting funds through bonds,” he added.

Commenting on the issue, BSEC Chairman Shibli Rubayat-Ul-Islam told The Business Post, “Our stock market has remained an equity-based one for a long time. We are now focusing on bonds, debentures, Sukuk, and other alternative investment options to make the market more vibrant.”

In March 2022, Bank Asia received approval from the securities regulator to issue perpetual bonds worth Tk500 crore in a bid to strengthen the additional Tier-1 capital base.

In the same month, the BSEC approved the issuance of Tk500 crore worth of perpetual bond by Mercantile Bank. The bank issued the bond to strengthen its additional Tier-I capital base.

Dhaka Bank Limited, another private commercial bank, got the regulatory approval to issue perpetual bonds worth Tk 200 crore.

Besides, National Polymer Industries Limited issued a zero coupon bond worth Tk300 crore.

This was a transferable, redeemable, non-convertible, and unsecured bond with a tenure of five years. The company was likely to utilise the fund on refinancing and purchasing machinery, infrastructure, and construction.

Moreover, Mir Akhter Hossain Limited (MAHL) issued 4-year non-convertible, fully redeemable, unsecured zero coupon bonds worth Tk 249.9 crore.

The issue price of the bond was Tk 207.18 crore with a face value of Tk 5 lakh per unit. Envoy Textiles also issued a non-convertible zero-coupon bond worth Tk200 crore at a coupon rate of 6.5 per cent to 7.5 per cent.

Out of the fund, the company used Tk 168.4 crore to finance its new gas-based 19MW captive power plant and to repay bank loans.

Apart from them, Alif Industries Limited issued a Tk300 crore floating rate, convertible bond for acquiring and bringing the scam-hit C & A Textile back into production.

In the year, only one company got regulatory approval for issuing Sukuk.

Banga Building Materials Limited’s Tk 300 crore worth of bond was a non-convertible, secured, fully redeemable, asset-backed, sukuk bond.

In 2021, the BSEC gave Beximco Limited the nod to issue Tk 3,000 crore worth of Islami Shariah-compliant Sukuk, the maiden approval for any company to raise funds through Sukuk in the country. In 2022, the stock market regulator also approved The City Bank to raise Tk 700 crore through the issuance of bonds to enable the bank to strengthen its capital base.

With an 8-year maturity period, the subordinated bond is a non-convertible, unsecured, and fully redeemable floating rate debt instrument.

The BSEC also allowed IFIC Bank to issue a Tk 500 crore worth of subordinated bond through private placements to strengthen its Tier-2 capital base.

Among others, One Bank was given the approval to raise Tk 400 crore, Al-Arafah Islami Bank Tk 500 crore, Eastern Bank Tk 500 crore, NRBC Bank Tk 500 crore, Mutual Trust Bank Tk 500 crore, IPDC Tk 150 crore, Premier Bank Tk 600 crore, Trust Bank Tk 400 crore, and United Commercial Bank Tk 1,000 crore by issuing bonds.

On the other hand, three companies in 2022 received approval to collect a total of Tk 547.75 crore through the issuance of preference shares.

Envoy Textiles issued fully redeemable non-convertible cumulative preference shares to raise a fund of Tk 87 crore for a five-year tenure.

It issued the preference shares through private placements at a face value of Tk 10 each with a coupon rate from 7 to 7.5 per cent.

The BSEC this year also approved Premier Cement Mills to raise Tk 310.75 crore through the issuance of preference shares, while Paramount Textiles received the nod to issue Tk 150 crore worth of preference shares.

In general, the bond is always good for developing ways to finance long-term investments and mega projects. But the matter should be handled prudently to tap maximum opportunities, experts say.    

“Since there are not available alternative options for long-term financing except for bank loans, we should develop a sustainable bond market for ensuring financing to big projects as well as a long-term investment system,” Zahid Hussain, former lead economist of World Bank, Dhaka, told The Business Post.

However, this bond should be made available for general investors and traded on the secondary market, he opined.