The Netherlands Development Finance Company has sold out all stakes in Dutch Bangla Bank Ltd after a joint stint of more than two decades.
The Dutch stakeholder sold 47 lakh shares of the bank at the block market, according to a Dhaka Stock Exchange disclosure posted on its website on Thursday.
The block market is a platform of a stock exchange where a large number of stocks are traded in a single transaction at a negotiated price. The transaction price may not match the traded price on a public market.
The share settlement will be carried out following the approval of the Bangladesh Bank.
Horizon Associate Ltd, a little known company, bought the shares for Tk32 crore at Tk68.60 per share. In July this year, Abdus Salam and Abedur Rashid Khan, two sponsor directors, transferred their total holdings of 5.59 crore shares in the name of Horizon Associate.
After purchasing Netherland's stake, the total holdings of Horizon Associate stood at 12.12 percent with the bank. The current market price of this stake is above Tk430 crore at the Dhaka Stock Exchange.
After taking this significant stake, the company appointed Abedur Rashid Khan and Md Fakhrul Islam as its nominee directors on the board following approval from Bangladesh Bank.
Horizon Associate, whose emergence was sudden as a significant shareholder of a prominent bank in the country, has no visible business activities or even a website.
M Shahabuddin Ahmed, founder chairman of the bank, is the director of Horizon Associates. The two other directors, Abedur Rashid Khan and Md Fakhrul Islam, are also involved with the company, according to the Registrar of Joint Stock Companies.
The share price of the bank remained above Tk100 in past one year due to good financial performance. Each share price reached Tk222 in March this year after the bank declared a profit of Tk420 crore at the end of 2018.
However, the share price started to drop in April this year and within three months it dropped below Tk70, losing around 68 percent from its highest price, according to the Dhaka Stock Exchange.
Though market insiders have defined the drastic fall in the share price as adjustment of 150 percent stock dividend that the bank declared in 2018, there are suspicions of price manipulation before the purchase of a big chunk of shares by the bank's own directors.
Dutch-Bangla Bank, reputed to be the largest private bank in terms of ATM networks across the country, is now being dominated by a company with a dubious background, leading to concerns being raised about its corporate governance.
"According to the Bank Company Act, the highest ceiling of shareholdings for a shareholder is set at 10 percent to ensure good governance. However, Dutch Bangla Bank took exemption from this law from Bangladesh Bank at its inception.
As a result, it is easy for a company to take hold of the bank," said a senior executive of Bangladesh Bank.
Responding to a query, Abul Kashem Md Shirin, managing director of the bank, said, "The Netherlands stakeholder had a 30 percent share in Dutch Bangla Bank Ltd and they gradually reduced it to 1 percent. They then sold their entire stake in the bank.
"The Netherlands Development Finance Company's investment strategy is to leave partnership after a company shows consistency in good performance. Presently, only one foreign investor from Hong Kong remains with the bank."
When asked about Horizon Associates Ltd, he declined having any details about the company.
According to several other officials of the bank, the company from Netherlands usually invests in the financial sector of underdeveloped countries. The company also provides financial aid to entrepreneurs of such countries in the form of partnerships.
Dutch Bangla Bank is currently doing well and so the Netherlands stakeholder decided to leave the Bangladeshi company, said the bank officials, preferring to be anonymous.
On Thursday, the closing price of Dutch Bangla Bank shares was Tk71.90 each. In the past year, the highest price of the bank's share was Tk237.20 while the lowest was Tk63.50.
Dutch Bangla Bank has a paid-up capital of Tk500 crore and has seen a steady rise in its profits in the past three years.The bank reported an earnings per share of Tk6.73 in the first nine months of the current year.
The bank commenced its journey in 1996 through a joint initiative by M Shahabuddin Ahmed and the Netherlands Development Finance Company.