Beximco stocks fall despite Tk3,000cr Sukuk plan

The Daily Star March 04, 2021
Star Business Report

Stocks of Beximco Limited dropped 1.64 per cent to Tk 84 yesterday despite the company’s announcement that it would issue Sukuk bonds worth Tk 3,000 crore.

The listed multinational conglomerate informed its investors about the bond through a disclosure published on the website of Dhaka Stock Exchange (DSE).

Beximco will issue the bonds in order to finance solar projects and expand its textile factory.

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.

“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 set at 10 per cent of the difference between the base rate and the annual dividend that Beximco will pay in a specific year.

So, the margin would be added to the base rate if the company’s dividend for the specific year surpasses the base rate.

If the dividend rate is equal to or below the base rate, the periodic distribution amount will be paid on par with the base rate only, according to the disclosure.

Beximco disbursed 5 per cent cash dividend for 2019-20, DSE data shows.

After issuing the bonds, the proceeds will be utilised to construct the solar projects of Teesta Solar and Korotoa Solar, two subsidiaries of Beximco Power Company.

It will also be used to finance the new machinery required to expand Beximco’s textile division, it added.

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).

Under the agreement, the BPDB will purchase electricity from Teesta Solar for 20 years at $0.15 per kilowatt hour.

Korotoa Solar, a joint venture between Beximco Power and the Jiangsu Zhongtian Technology Company, 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 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.

Investors will have the option to convert up to 100 per cent of their respective investment in the Sukuk into ordinary shares of Beximco within 5 years, the company said.

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 last year, the government issued Tk 8,000 crore Sukuk bonds for a safe water supply project.

There was a huge response to this initiative from Shariah based banks, non-banking financial institutions and other eligible parties.

So, the private sector is also taking initiatives to issue Sukuk 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.

Sukuk bonds have a broader customer base as any investor can invest in either the Shariah based or conventional bonds, he added.

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