Beximco announced the country’s first Sukuk Plan on March 3 but even after its announcement to issue Sukuk bonds worth Tk 3,000 crore, stocks of Beximco Limited declined 1.64 per cent to Tk 84 on the day.
The investors of the listed international conglomerate were informed about the bond through a disclosure published on the website of the Dhaka Stock Exchange (DSE).
The bond will be issued by Beximco as they have the intentions to finance solar projects and grow their textile factory. A disclosure stated that the Sukuk will be issued for the purpose of the solar projects, named Teesta Solar and Korotoa Solar, and they will also provide equipment for Beximco’s proposed textile division.
As per the disclosure, 50 per cent of the Sukuk would be privately placed while 25 per cent would be reserved for Beximco shareholders and the remaining 25 per cent would be floated through public offers, as the Sukuk would be listed on the local bourses upon getting the Bangladesh Securities and Exchange Commission (BSEC) approval.
DSEX, the benchmark index of the country’s premier bourse, was also reluctant to move following the announcement as it dropped 20 points, or 0.36 per cent, to stand at 5,488.
“Since Beximco’s stocks jumped in the last few months, the announcement did not impact its stock price,” said a merchant banker preferring anonymity.
According to the DSE data, the conglomerate’ stocks rocketed more than 3 times in the last 3 months with the price reaching Tk 95 from Tk 27.
“The base rate for Beximco’s Sukuk bond is much higher than the bank rate so investors must be happy with it,” he added.
The base rate for Sukuk was set at 9 per cent per annum so that investors can collect their returns annually. The margin is fixed at 10 per cent of the difference between the base rate and the annual dividend that Beximco is obliged to pay in a particular year. Therefore, the margin would be added to the base rate if the company’s dividend for the particular year exceeds the base rate.
Additionally the disclosure stated that if the dividend rate is equal or less than the base rate, the stipulated periodic distribution will be paid on par with the base rate. The DSE data illustrated that Beximco disbursed 5 per cent cash dividend for 2019-20.
A disclosure stated that the Sukok will be issued for the purpose of the solar projects, named Teesta Solar and Korotoa Solar, and they will also provide equipment for Beximco’s proposed textile division. Teesta Solar is a joint venture of Beximco Power and China’s TBEA Xinjiang Sunoasis Company and it has an agreement with Bangladesh Power Development Board (BPDB).
The agreement stated that the BPDB will buy electricity from Tessta Solar for 20 years at $0.15 (Tk 12.71) per kilowatt hour (kW).
A joint venture between Beximco Power and the Jiangsu Zhongtian Technology Company, Korotoa Solar has a similar agreement with the BPDB. According to the 20-year PPA terms, BPDB will buy electricity from Korotoa Solar’s plant at $0.14 (Tk 11.87) per kilowatt hour.
City Investments Capital Resources is the issue manager of Beximco’s Sukuk bond. The bond will be named Beximco Sukuk Al Istisna and would be convertible to Asset Backed Sukuk. The face value of each bond, which will have five-year tenure, would be Tk 100 with a minimum subscription size of Tk 5,000. Half of the fund would be raised through private placement from eligible investors, 25 per cent from existing shareholders and the rest through public offers.
The company said that the investors will have the choice to convert up to 100 per cent of their respective investment in the Sutuk into ordinary shares of Beximco within 5 years. If any Sukuk holder does not want to convert in full or in part during the tenure, they will get back the fund at maturity in one bullet payment. In December 2020, Tk 8,000 crore of Sutuk bonds were issued by the government for safe water supply projects.
There was a huge response to this initiative from Shariah based banks, non-banking financial institutions and other eligible parties. Hence, the private sector is taking steps to issue Sutuk bonds.
With the Sukuk bond, investors’ confidence will be higher because it is an asset backed bond, said Ershad Hossain, managing director and CEO of City Bank Capital Resources. He also added that the bonds have a larger customer base as any investor can invest in either the Shariah based or conventional bonds.