The Investment Corporation of Bangladesh (ICB) has decided to raise Tk1,000 crore by issuing a bond called "ICB 1st Mudaraba Sukuk" to support the capital market.
The corporation said the tenure of the Sukuk, a Sharia-compliant bond-like instrument, will be ten years. The company will issue the bond after securing approval from the Bangladesh Securities and Exchange Commission (BSEC) and other regulators.
The return against the Sukuk bond will not be lower than the Dhaka Stock Exchange's (DSE) average dividend yield, according to the company officials.
ICB will distribute at least 75% of the net profit from the Sukuk to the unit holders at the end of each year, and distribute the rest later.
For example, the average market yield was 3.11% at the end of Monday's session at the DSE. If the average market yield remains the same at the end of the year, the Sukuk holders would not receive less than 3.11% return.
The investors will receive 20% of their investment in the Sukuk at the end of the 6th, 7th, 8th and 9th year each in terms of the face value or market value of the Sukuk unit – whichever is lower during the 6th to 9th year. The rest of the capital will be returned to the Sukuk holders at the end of the 10th year.
ICB Managing Director Abul Hossain could not be reached over phone for comments regarding the bond.
A number of ICB officials said the securities regulator has been putting pressure on the ICB, a state-owned non-bank financial institution (NBFI), to increase its investment in the stock market, but due to the single borrower exposure limit set by the Bangladesh Bank, it is not getting large loans from the banks. Meanwhile, there are many investors who want to invest in accordance with the Shariah, so ICB is going to raise funds through a Sukuk bond.
ICB will invest the fund raised through the Sukuk in various Shariah-based securities or instruments in the capital market and money market. In this case at least 70% will be invested in the capital market and the rest will be invested in the money market.
The government formed the ICB in 1976 to fund the stock market. The company is lending money to the private sector as a NBFI under the Bangladesh Bank. The BSEC thinks that the company has moved away from its main responsibility in doing so.
That is why the BSEC has decided to revamp the ICB and publish an advertisement for appointing an international consultant farm for this purpose.
In a meeting with the ICB this month, the BSEC directed the corporation to increase investment in the stock market.
Earlier, the BSEC permitted ICB to issue a subordinated bond to raise Tk2,000 crore. So far, the corporation could raise Tk1,590 crore by issuing that bond.
According to ICB's annual performance agreement with the government for FY22, the government has set a target for the corporation to invest Tk1,700 crore in the capital market and to disburse Tk500 crore as margin loans.
Meanwhile, ICB recommended an 11% cash dividend to the shareholders in FY21, and 5% cash and 5% stock dividends in the previous year.
Its share price jumped by 108% from April to the beginning of October this year, but it has fallen by 30% in the three months since then.
ICB's share price stood at Tk118 each at the end of Monday's trading session at the DSE.