BSEC rejects IFIC Bank’s right share offer

The Bangladesh Securities and Exchange Commission (BSEC) has cancelled the right share offer of IFIC Bank Ltd because the bank failed to appoint an underwriter for subscribing the shares.

The securities regulator announced its decision by sending a letter to the bank on Monday.

The Business Standard tried to reach the bank's Company Secretary Md Mokammel Hoque over the phone but he did not receive the calls.

Companies issue right shares to raise capital from existing shareholders and underwriters provide valuable service to these companies in launching shares to the public.

Underwriter companies, such as merchant banks, give guarantees to buy the shares of the issuer company that intends to raise capital through a public offering. The underwriter then gets commission against this guarantee.

However, if general investors do not buy all the shares of the issuer company, the underwriter buys the remaining portion.

In July this year, IFIC Bank revised the ratio of right shares to 1R:5 – one right share for every five shares held – at a face value of Tk10 each instead of the earlier recommended 1R:4 – one right share for every four shares.

The bank's shareholders approved the right share offer at its extraordinary general meeting.

IFIC Bank Ltd – which debuted on the Dhaka Stock Exchange (DSE) in 1986 – has paid-up capital of Tk1,619 crore. It has secured a reserve and surplus of Tk1,034 crore.

As a part of continuous capitalisation to support its growing balance sheet, the bank issued a one-against-one right share in 2017.

In the first three quarters of this year, the bank posted net profit of Tk122.31 crore and earnings per share of Tk0.76, which was 43% lower than the same period of the previous year.

In that period, net interest income decreased by 55% to Tk205.95 crore.

The bank paid a 10% stock dividend to its shareholders for the year 2019.

At the DSE on Tuesday, IFIC Bank shares closed at Tk10.50 per share.

IFIC was set up in 1976 as a joint venture financer between the government and private sector entrepreneurs, with an objective to work as a finance company within the country as well as set up joint venture banks and financial institutions abroad.

In 1983, as the government allowed banks in the private sector, IFIC was converted into a full-fledged commercial bank. The government now holds 32.75% of IFIC Bank's shares.

The directors and sponsors own 4.11% of the bank's shares and the remainder are held by general investors.