Navana Pharma to issue Tk150cr bond for loan repayment

Navana Pharmaceuticals is going to issue a Tk150 crore bond, for a maturity period of five years, to repay its existing bank loans.

Following a board meeting on Sunday, the drug maker in a price sensitive information disclosure on the Dhaka Stock Exchange (DSE) website, said the proposed bond would be partially convertible.

A bond is partially convertible when some of the debt capital would be later converted into the company's equity, and the rest of the bond money would be paid back to the investors after the maturity period.

The bond will be privately placed among investors and they would receive interests twice a year.

"It will strengthen our financial position and provide us with the necessary capital to pursue our growth strategies," said Jounul Abedin, company secretary of Navana Pharmaceuticals.

The bond would help save some interest expenses as the cost of bond capital would be lower than that of bank loans.

The company would also enjoy a better cash flow as bond interest would be paid once in every six months while bank loans are paid back in monthly installments.

"The convertible redeemable nature of the bond will allow us to attract both equity and debt investors who are looking for a unique investment opportunity with attractive risk-adjusted returns," he added.

The convertible nature of the bond allows investors to participate in the upside potential of the company's equity, while the redeemable feature provides downside protection by allowing investors to redeem their bonds for cash, explained Abedin.

The interest will have a floating rate that means interest rate would depend on the money market benchmark rates.

Abedin said they were planning to offer a rate approximately 150 basis points higher than the benchmark rate of five-year treasury bonds.

As of 31 March, Navana Pharmaceuticals has a bank liability of Tk330 crore.

The company has paid back Tk21.18 crore bank loans out of the capital it collected from the investors through an initial public offering last year.

The plan is subject to the approval of shareholders and the regulator.

Navana Pharmaceuticals shares, having a face value of Tk10 apiece, soared by 7.33% to Tk117.1 at the DSE on Sunday.