Cash-strapped Investment Corporation of Bangladesh (ICB) considers low-cost funds or partial conversion of debts into equity for survival.
It will sit with Finance Minister Amir Khosru Mahmud Chowdhury this week to seek his support in its favour for low-cost funds from the government or for the conversion of debts into equity.
The ICB at present has an aggregate amount of debts worth around Tk 130 billion, including interest, most of which was received from state-run entities including Sonali Bank, Janata Bank and Agrani Bank. These banks are also shareholders of the Corporation.
According to the managing director of ICB, Niranjan Chandra Debnath, the Corporation’s annual operating cost is Tk 950 million while the annual interest payments amount to around Tk 11 billion.
On the other hand, its annual income is around Tk 5 billion. Hence, it is difficult for the ICB to conduct day-to-day transactions in the equity market and simultaneously pay back interest to lenders on a regular basis.
Due to discontinuity in loan repayment, lenders are under pressure to keep provisions against the debts.
In this context, the Corporation has drafted two proposals to be placed before the finance minister.
“If the government gives a low cost fund worth Tk 100 billion, it will be easier for us to pay interest regularly while participating in day-to-day trading,” said Mr Debnath. If the government is unable to give the said amount, the ICB would seek Tk 50 billion along with permission to convert debts of at least Tk 20 billion into equity.
“If the debts are converted into equity, the lenders will get relief from the pressure of provisioning,” Mr Debnath added.
The Corporation has already secured Tk 40 billion – Tk 30 billion in 2024 and Tk 10 billion in 2025 – from the government to ensure its smooth operations and recover from losses.
The ICB discussed the fresh proposals for further funds at its board meeting recently with representatives from Agrani, Janata and Sonali Bank.
Asked about the position of the lenders regarding conversion of the debts, the ICB’s managing director said representatives had expressed mixed opinions; a few of them agreed on the proposal while others differed with it.
“The lenders are also state-run entities. So, it's difficult for them to agree on the proposal without prior consent of the government.”
The ICB’s managing director also said the Corporation’s survival and its subsequent support for the secondary market would depend on the government’s approval of one of the proposals.
“If one of our proposals is accepted by the government, the Corporation will return to profits within one year as the market is now playing a supportive role for us.”
Mr Debnath is also optimistic that his organisation would regain capability to pay off debts within 2036 with the support from the government.
The state-run investment bank has become trapped into debts mainly because of supporting the market with high cost borrowings.
Apart from expensive credits, it raised public funds by issuing rights shares and bonds -- under government pressure – to support the equity market but failed to secure return from it. About Tk 7 billion was collected through rights shares in 2000, and Tk 17.9 billion through subordinated bonds in 2018.
Asked whether there was any fund misuse, the ICB chief said some funds had been misused but the Corporation had already plugged loopholes to avert repetition of previous missteps.
“According to our investment strategy, the ICB now has no scope of fund injection into junk stocks,” he said.
ICB incurred a loss of Tk 12.13 billion in FY25 for the first time because of high provisioning, low capital gains and increased interest payments.
It also failed to recover more than Tk 12.05 billion invested in fixed deposit receipts (FDRs) with 12 troubled financial institutions.
The institutions are People's Leasing, International Leasing, Premier Leasing, Fareast Finance, Prime Finance, First Finance, Aviva Finance, BD Finance, Phoenix Finance, and FAS Finance. The Corporation had to keep provisions of Tk 6 billion for the loss of interest and principal kept in the FDRs.
