ICB with equity minus needs intensive care to sustain

Far from supporting the stock markets of the country, the Investment Corporation of Bangladesh (ICB) is holding onto bad shares and the fund manager itself needs intensive support of others to sustain.

Although the ICB has invested various times to support the stock market, the company is now in equity minus.

In the opinion of the capital market stakeholders, supporting the stock market is one of the objectives of the ICB, but it has not complied with its motto properly. It has rather bought weak company shares without any analysis and for personal gain. As a result, as expected, the share prices now have dived to the rock bottom. This has been exacerbated by the coronavirus pandemic. As a result, the price of securities invested in the ICB's stock market has come down by about Tk 4,000 crore from the purchase price causing equity of ICB to become minus.

Speaking at a seminar organized by the Chittagong Stock Exchange (CSE) on July 18, ICB Managing Director Abul Hossain said the ICB has been investing since the collapse of share market in 2010. It has invested only to support the stock market without thinking of its own business. However, by 2020 ICB has lost its investment capacity.

It has been observed that on March 31 this year, the price of securities invested by ICB as its own or as individual has come down to Tk 3,719.71 crore from the purchase price causing the equity of the company to become negative at Tk 248.51 crore while keeping reserves. As a result, the company's net assets per share (NAVPS) with a paid-up capital of Tk 767.44 crore has turned negative by Tk 3.24.

The market value of the company's shares invested on June 30, 2019 was Tk 11,607.22 crore. However, market price of securities on March 31 has come down to Tk 8,863.57 crore despite purchasing more than selling in the last 9 months. Out of this company, most (non-listed companies) outside the subsidiary have invested in the controversial Padma Bank. The amount invested in this bank is Tk 85 crore.

On the other hand, price of securities bought with the company's subsidiaries is below the purchase price of Tk 4,056.2 crore. In consequence, equity of Tk 3,109.54 crore as on June 30 last year has come down to Tk 200.26 crore and the NAVPS of Tk 40.52 has come down to Tk 2.61.

The company has reduced its equity by holding on to bad shares. On the other hand, being an ICB listed company, it is selling good shares considering the shareholders and distributing profits to the shareholders. How long it will last to sell good shares and park bad shares is now a matter of concern.

In this regard, ICB Managing Director Abul Hossain said to The Business Post, when those shares were taken a long ago, everything was all right. However, this issue will be resolved gradually. “We can’t sell shares at a loss and there are no opportunities,” he said. There are some problems with this.

According to the consolidated calculation, ICB sold Tk 937.53 crore shares in 9 months (July 19-March 20) with a capital gain of Tk 365 crore 3 lakh. At the same time, the company has purchased securities worth Tk 1,435.59 crore.

Dhaka Stock Exchange (DSE) director Shakil Rizvi said to The Business Post, we have been hearing allegations of buying shares of weak and closed companies against the ICB for a long time. There are also allegations of gamblers buying new shares at high prices and parking. None of the previous managing directors of the ICB, in the past few years has been able to come out of this allegation. This issue should be investigated for the sake of clarity among the stakeholders.

Meanwhile, the Bangladesh Securities and Exchange Commission (BSEC) has come forward to bring the ICB out of the current predicament and fulfill its duty towards the stock market. In the meantime, BSEC has issued a notice seeking consultant to reform the company. Reform encompasses reviewing ICB's current and historic financial and non-financial performance, overall activities, ICB's role in stock market development, as well as whether ICB is properly fulfilling its responsibilities as a state-owned investment institution.

The consulting firm will also review the ICB's real business opportunities, investment strategy, portfolio risk analysis, portfolio diversification, investment decision-making process, source and use of funds and management control of ICB and its affiliates.

sr/wi